PF^SI  1*97 


LIBRARY 

OF  THE  |  t       W 


University  of  California. 


GIFT  OF 


Received        *J£L&Cs  ,  189  J  • 

Accession  No.  (d  0  7  oO        .    Class  No. 

A 


N 


Practical  Economics 


A  COLLECTION  OF  ESSAYS  RESPECTING  CERTAIN  OF  THE  RECENT 
ECONOMIC  EXPERIENCES  OF  THE  UNITED  STATES 


BY 


DAVID   A.  WELLS,  LL.D.,  D.C.L. 

MEMBRE     CORRBSPONDANT     DE     L'lNSTITUT    DK     FRANCE,    CORRESPONDENTS    DELLA     KEALE    ACCADEMIA 

DE    LINCEI,    ITALIE,    ETC. 


"Experience  keeps  a  dear  school ;  but  fools  will  learn  in  no  other,  and  scarce  in 
that ;  for  it  is  true  we  may  give  advice,  but  we  cannot  give  conduct. — Benjamin 
Franklin. 


NEW  YORK  &  LONDON 

G.    P.   PUTNAM'S    SONS 

&\t  $nichtrbocktr  Jlrcss 

1894 


(oKjto 


COPYRIGHT  BY 

G.  P.  PUTNAM'S  SONS 

1885 


Press  of 

G.  P.  Putnam's  Sons 

New  York 


TO 
The  Hon.  HUGH  McCULLOCH 

AS    A    TESTIMONIAL    TO    HIS    HIGH    STATESMANSHIP    AND    UNQUESTIONED    INTEGRITY 

IN     SUCCESSFULLY    DEALING,     AS     SECRETARY    OF    THE    TREASURY     OF    THE 

UNITED   STATES,    WITH    SOME    OF   THE   MOST   DIFFICULT   FINANCIAL 

PROBLEMS  THAT  HAVE  EVER  BEEN  PRESENTED  TO  A  FINANCE 

MINISTER,  AND  AS   A    MEMENTO  OF   A   FRIENDSHIP 

THAT   YEARS   OF  OFFICIAL  AND   PRIVATE 

INTERCOURSE    HAVE    CREATED 

AND    STRENGTHENED 

THIS    VOLUME 

|f  rcspwifullg  gcbicatcb  bg  f Ije  ^tttjjor 


PREFACE. 


THE  essays  embraced  in  this  volume — with  three  exceptions — 
were  originally  contributed  to  and  published  in  the  Atlantic  Maga- 
zine, the  Princeton  Review,  the  Nation,  and  the  N.  Y.  World,  at 
different  dates  from  1872  to  1884.  The  exceptions  are  "  The 
Dollar  of  the  Fathers  vs.  The  Dollar  of  the  Sons,"  which  was 
published  privately  ;  the  essay  on  "  The  Production  and  Distribu- 
tion of  Wealth,"  which  has  heretofore  been  published  only  in  the 
Proceedings  of  the  American  Social  Science  Association  ;  and  the 
fourth  chapter  of  "  Our  Experience  in  Taxing  Distilled  Spirits," 
which  was  written  specially  for  this  volume,  and  has  never  before 
been  printed. 

The  chief  warrant  for  their  republication  in  a  collected  form 
is  to  be  found  in  the  circumstance  that,  with  the  exception  of  the 
final  article  of  the  series,  they  each  illustrate  a  phase  in  the  re- 
cent economic  experiences  of  the  United  States,  which  has  not  as 
yet  been  discussed  or  related  as  a  part  of  any  detailed  and  con- 
secutive history ;  an  experience  in  which  questions  of  the  highest 
importance  in  respect  to  the  use  and  issue  of  currency,  the  im- 
position of  taxes,  the  collection  of  revenue,  and  the  regulation  of 
trade  and  commerce — all  involving  transactions  of  enormous 
magnitude  and  infinite  detail — have  been  discussed,  regulated  by 
legal  enactments,  and  carried  to  practical  results,  without,  for 
the  most  part,  any  reference  whatever  to  accepted  economic 
principles,  and  often  mainly  under  the  influence  of  selfish  and 
sometimes  of  corrupt  motives  and  agencies.  A  century  hence, 
except  for  such  chronicles  of  recent  tariff  legislation  as  are  here 
given,  the  writer  is  of  the  opinion  that  the  world  would  find  it 
very  difficult  to  believe  that  such  an  illiberal  commercial  policy 
and  body  of  tax  and  navigation  laws  as  now  exist  could  ever 
have  been  maintained  and  defended  for  any  length  of  time,  by  a 
people  so   free,  well  educated,   and  jealous  of   their   individual 


VI  PREFACE. 

rights  as  those  of  the  United  States ;  while  in  respect  to  the  ex- 
perience of  the  United  States  in  the  taxing  of  distilled  spirits,  it 
is  safe  to  affirm  that  nothing  similar,  viewed  from  an  economic 
and  moral  standpoint,  ever  before  occurred  in  any  country  of 
modern  civilization,  or  is  likely  to  occur  again. 

The  author  accordingly  indulges  in  the  belief  that  these 
essays,  although  fragmentary,  will  not,  as  now  published  in  a 
collected  form  and  with  some  revisions  and  additions,  be  regarded 
as  a  wholly  unimportant  contribution  to  the  existing  stock  of 
economic  knowledge. 

David  A.  Wells. 

Norwich,  Conn.,  October,  1885. 


J»   Till 

hivir::tt; 


CONTENTS. 


A  Modern  Financial  Utopia :  How  It  Grew  Up,  and  What  Became  of  It  .         .  I 
The  True  Story  of  the  Leaden  Statuary ;  or,  A  Curious  Chapter  in  Economic 

History 21 

The  Silver  Question 34 

Are  Gold  and  Silver  Indispensable  as  Measures  of  Value  ?          ....  58 

Tariff  Revision  :  Its  Necessity  and  Possible  Methods.     I.          ....  64 

Tariff  Revision :  Its  Necessity  and  Possible  Methods.     II So 

The  Most  Recent  Phases  of  the  Tariff  Question.     I. 9S 

The  Most  Recent  Phases  of  the  Tariff  Question.     II 117 

The  "  Foreign  Competitive  Pauper-Labor"  Argument  for  Protection  .         .133 

Our  Experience  in  Taxing  Distilled  Spirits.     I. 152 

Our  Experience  in  Taxing  Distilled  Spirits.     II.. 176 

Our  Experience  in  Taxing  Distilled  Spirits.     Ill 194 

Our  Experience  in  Taxing  Distilled  Spirits.     IV 212 

Influence  of  The  Production  and  Distribution  of  Wealth  on  Social  Development,  235 


Til 


OF   Till 


BlYXR^Xt 


A  MODERN  FINANCIAL  UTOPIA:    HOW  IT  GREW 
UP,  AND  WHAT  BECAME  OF  IT. 

Atlantic  Monthly,  April,  1874. 

THERE  is  one  great,  plain,  practical  fact  in  respect  to  irre- 
deemable paper  money,  which  in  itself  is  a  sufficient  answer 
to  all  the  arguments  that  may  be  advanced  in  its  favor.  And  that 
is,  that  there  cannot  be  one  single  instance  referred  to  in  the  history 
of  any  state,  nation,  or  people,  in  which  its  adoption  and  use  has 
not  been  wholly  disastrous.  The  more  conspicuous  examples  and 
illustrations  which  prove  this  assertion — namely,  the  John  Law 
scheme  of  1 716-1720,  the  currency  of  the  American  colonies  be- 
fore the  Revolution,  the  Continental  money,  the  French  assignats  ; 
and  later  and  in  this  century,  the  paper-money  experience  of 
Austria,  Russia,  Italy,  Spain,  Turkey,  and  the  South  American 
states — are  all  more  or  less  familiar  ;  but  there  is  another  ex- 
ample, little  known,  and  rarely  if  ever  referred  to,  which,  occur- 
ring within  a  comparatively  recent  period,  and  under  conditions 
analogous  to  those  which  in  the  opinion  of  many  render  the 
United  States  an  exception  to  all  the  rest  of  the  world,  is  no  less 
interesting  and  instructive.  We  refer  to  the  fiscal  experience  of 
the  Republic  of  Texas,  which,  during  the  brief  period  of  its  ex- 
istence as  an  independent  nation,  committed  on  a  small  scale 
nearly  all  the  financial  blunders,  and  tried  nearly  all  the  financial 
experiments,  which  the  greater  nations  of  Europe  have  before  and 
since  committed  and  tried  on  a  large  scale,  and,  as  might  naturally 
have  been  expected,  with  an  almost  exact  parallelism  of  results. 
The  details  of  this  curious  history  were  first  collected  by  the  late 
William  M.  Gouge,  of  Philadelphia, — an  American  writer  on 
finance  whose  reputation  was  never  commensurate  with  his  worth 
and  abilities, — who  visited  Texas  after  its  annexation,  for  the  pur- 
pose of  specially  studying  up  this  subject ;  and  whose  work,  pub- 


2  PRACTICAL  ECONOMICS. 

lished  near  a  quarter  of  a  century  ago,  and  now  a  rare  volume, 
constitutes  the  source  from  which  has  been  derived  the  following 
information. 

Previous  to  the  year  1835,  Texas  was  one  of  the  states  of  the 
Republic  of.  Mexico  ;  and  its  currency  consisted  of  gold  and  sil- 
ver, and,  to  a  very  limited  extent,  of  the  notes  of  the  banks  of  the 
United  States.  As  the  civilized  population  was  small,  no  large 
amount  of  currency  of  any  kind  was  required,  but  as  compared 
with  other  newly  settled  countries,  money  was  reported  "  to  have 
been  plenty."  A  great  part  of  the  Texan  currency  consisted  of 
what  were  termed  "  hammered  dollars,"  or  old  Spanish  dollars 
from  which  the  royal  effigy  had  been  effaced  by  the  Mexicans  as 
a  testimony  of  disrespect  for  their  former  rulers.  Time  contracts 
were  however  made  in  new  Mexican  dollars,  which  were  termed 
"  eagle  money,"  and  circulated  at  one  hundred  cents  to  the  dol- 
lar ;  while  the  "  hammered  dollar,"  though  containing  fully  as 
much  pure  silver,  circulated  at  only  ninety  cents  ;  the  probable 
reason  for  the  currency  depreciation  of  the  latter  being  that  the 
destruction  of  their  certificate  of  value  effected  by  defacing  the 
stamp,  also  prevented  their  use  in  settling  foreign  exchanges,  and 
consequently  their  exportation. 

After  the  commencement  of  the  Texan  revolution,  and  the 
inauguration  of  a  provisional  government,  in  November,  1835, 
hammered  money  gradually  disappeared  from  circulation,  and 
bank-notes  from  the  States  came  in  more  freely  and  constituted 
the  chief  currency.  In  1837,  however,  the  banks  of  the  United 
States  suspended  specie  payments,  and  while  all  of  the  circulating 
medium  of  Texas  became  greatly  depreciated,  a  very  consider- 
able portion  derived  from  the  banks  of  the  State  of  Mississippi 
became  altogether  worthless.  "  Thereby,"  says  the  historian 
above  referred  to,  "  many  of  the  people  of  Texas  suffered  severely, 
but  their  aggregate  losses  did  not  equal  their  aggregate  gains,  as 
many  of  these  notes  had  been  obtained  in  loans,  and  many  of 
these  loans  were  not  repaid." 

From  the  very  first  the  Texans  do  not  appear  to  have  ever 
allowed  themselves  to  be  embarrassed  by  the  idea  of  Old  World 
bankers,  political  economists,  and  doctrinaires,  that  the  circulating 
medium  of  a  country  should  be  based  upon  the  precious  metals. 
They  were  wiser  than  all  that ;  and  they  had  in  their  possession 


A   MODERN  FINANCIAL    UTOPIA,  3 

something  more  valuable  than  gold  and  silver, — the  element  and 
source  of  all  wealth, — namely,  an  almost  unlimited  quantity  of 
cheap,  fertile  land.  This  was  the  true  thing,  in  their  opinion,  to 
bank  on,  and  bank  on  it  they  did.  The  first  bank  chartered, 
nearly  six  months  before  the  commencement  of  hostilities,  was 
the  "Commercial  and  Agricultural  Bank"  of  the  department 
of  Brazos.  Its  capital  was  not  to  exceed  one  million  of  dollars, 
divided  into  shares  of  one  hundred  dollars  each.  It  was  author- 
ized to  establish  branches  anywhere  and  everywhere  ;  receive 
eight  per  cent,  per  annum  on  loans  not  exceeding  six  months,  and 
ten  per  cent,  on  loans  exceeding  that  time  ;  and  only  the  capital 
of  the  bank  was  to  be  responsible  for  the  notes  it  issued.  But 
the  subscribers  were  required  "  to  adequately  secure  the  value  of 
their  shares  with  real  estate  in  the  republic."  In  short,  it  was  a 
most  liberal  charter,  and  the  only  thing  any  way  illiberal  about  it 
was  the  single  clause,  "  that  as  soon  as  one  hundred  thousand  dol- 
lars, at  least,  have  entered  the  vaults  of  the  bank,  it  may  com- 
mence operations."  "  Dollars,"  however,  at  that  time,  in  Texas, 
says  our  historian,  "  meant  just  whatever  the  people  meant  to  make 
it  mean."  William  M.  Strong,  of  Pennsylvania,  Associate  Justice 
of  the  Supreme  Court  of  the  United  States,  had  not  then  taken 
his  seat  on  the  bench  ;  but  the  Texans  in  1835  had  anticipated  the 
sentiments  he  expressed  when  he  gave  the  legal-tender  decision  in 
1 87 1,  that  "  value  was  an  ideal  thing"  '  /  that  °  it  is  hardly  correct  to 
speak  of  a  standard  of  value  "  '  /  that  "  the  gold  and  silver  thing  we 
call  a  dollar  is,  in  no  sense,  a  standard  of  a  dollar  "  '  /  in  fact,  that 
any  thing  is  a  dollar  which  the  law-making  powers  may  imagine  it 
to  be,  and  that  it  is  not  at  all  necessary  that  their  "  imagining  " 
for  one  year  should  be  the  same  as  their  "  imagining  "  for  some 
other  and  subsequent  year.  And  as  the  Bank  of  Agriculture  and 
Commerce  appears  to  have  commenced  operations,  and  as  there  is 
no  evidence  that  the  one  hundred  thousand  dollars  was  ever  paid 
in,  we  are  warranted  in  supposing  that  the  "  ideal  "  took  in  every 
respect  the  place  of  the  real.  That  the  Congress  of  Texas  had 
also  faith  to  a  large  extent  in  the  ideal  standard  of  value  is  made 
evident  by  the  fact  that,  by  an  act  passed  December,  1836,  the 
secretary  of  the  treasury  was  authorized  and  empowered  u  to 
negotiate  a  loan  from  any  bank  or  banks  that  may  be  established 

1  Decisions  Supreme  Court  of  t/ie  United  States,  1871. 


4  PRACTICAL  ECONOMICS. 

in  this  republic,  of  sufficient  amount  for  the  payment  of  all  just 
claims  "  held  by  certain  creditors  against  the  government  ;  and 
lest  the  Bank  of  Agriculture  and  Commerce,  with  its  capital  of 
one  million  of  "  ideal  "  dollars,  and  the  value  of  its  shares  made 
good  by  the  pledge  of  real  estate,  should  not  be  able  to  afford 
sufficient  banking  facilities  to  a  population  not  exceeding  fifty 
thousand,  the  "  Texas  Railroad  and  Navigation  Banking  Com- 
pany "  was  in  1836  incorporated  in  addition.  The  capital  of  this 
company  was  fixed  at  five  millions,  to  be  increased  if  desired  to 
ten  millions,  with  the  right  of  connecting  the  waters  of  the  Rio 
Grande  and  the  Sabine  by  means  of  internal  navigation,  and  the 
privilege  of  making  branch  canals  and  branch  roads  in  every 
direction  ;  and  this  too  at  a  time  when  the  Republic  of  Texas  had 
not  the  means  of  supporting  a  navy  sufficient  to  protect  its  coasts 
from  the  attacks  of  one  small  sloop  of  war  beloging  to  the  Mexicans. 
The  five  millions  of  stock  were  immediately  subscribed  by  eight 
individuals  and  firms;  but  the  operations  of  the  banking  company 
were  exceedingly  limited,  and  are  thus  reported  :  None  of  the 
subscribers  paid  in  any  thing.  One  sold  his  interest,  however,  to 
a  firm  in  New  York,  and  took  his  pay  in  store-goods.  A  second 
sold  his  for  ten  thousand  dollars  ;  while  a  third  swapped  his  for 
three  leagues  of  land,  which  he  subsequently  sold  at  ten  dollars 
and  a  half  an  acre,  "  The  rest  of  the  subscribers  retain  their 
original  stock  to  this  day."  Other  projects  of  a  like  character 
were  brought  forward;  namely:  "A  Joint-Stock  Company  for 
the  Erection  of  a  Hotel  and  Bath  House  at  Velasco,  with  Banking 
Privileges  ";  "  The  Texas  Internal  Improvement  and  Banking  Com- 
pany"; "The  Red  River  and  Aransaso  Bay  Navigation,  Railroad, 
and  Banking  Company";  and  finally,  one  for  establishing  a  bank  on 
the  faith  of  the  government.  All  these  projects  were  favorably 
received  ;  but  before  the  necessary  laws  could  be  passed,  to  put 
them  in  operation,  news  was  received  of  the  general  failure  of  the 
banks  of  the  United  States  (1837),  and  the  republic  was  deprived 
of  its  prospective  capital,  enterprise,  and  consequent  develop- 
ment. To  supply  the  necessities  of  a  circulating  medium  oc- 
casioned by  the  discredit  of  bank-notes  issued  in  the  United 
States,  individuals  and  municipalities  commenced  in  1837  to  issue 
"  shin-plasters,"  or  notes  for  the  fractional  parts  of  a  dollar,  and 
continued  to  do  so  until  1840,  when  an  end  was  put  to  them  by 
the  bankruptcy  of  the  issuers. 


A   MODERN  FINANCIAL    UTOPIA,  5 

It  is  now  desirable  to  turn  back  and  consider  more  directly 
the  means  by  which  Texas  provided  funds  to  carry  on  the  war. 
At  the  outset  the  new  republic  had,  apart  from  the  pledge  or  sale 
of  its  lands,  but  few  financial  resources.  A  financial  report  made 
to  the  provisional  government  or  council  in  November,  1835, 
brought  out  the  fact,  that  although  an  army  was  in  the  field,  engaged 
in  active  operations,  yet  "our  finances,  arising  from  the  receipt  of 
dues  for  lands,  as  will  appear  on  file  in  Mr.  Gail  Borden's  report, 
which  were  in  his  hands,  are  fifty-eight  dollars  and  thirty  cents. 
This  money  has  been  exhausted,  and  also  an  advance  by  the 
president  of  the  council  of  thirty-six  dollars.  There  were  also 
several  hundred  dollars  in  the  hands  of  the  alcalde  of  Austin. 
Upon  this  money  several  advances  have  been  made ;  as  such  you 
may  consider  that  at  the  present  moment  the  council  is  out  of 
funds." 

But  it  will  never  do  to  despise  the  day  of  small  things.  The 
men  who  had  undertaken  to  make  of  Texas  a  free  and  in- 
dependent republic  were,  in  respect  to  audacity,  enterprise,  and 
self-reliance,  typical  emigrants  from  the  great  American  nation, 
and  having  put  their  hands  to  the  plow  had  no  intention  of  stop- 
ping half-way  in  the  furrow.  But  to  succeed  in  their  undertaking 
"ways  and  means  "  were  indispensable;  "  and  finding,"  says  Mr. 
Gouge,  "  that  other  nations  in  their  periods  of  exigency  had  re- 
sorted to  taxing,  borrowing,  begging,  selling,  robbing,  and  cheat- 
ing, they  determined  to  try  all  six,"  and  he  might  have  added, 
they  in  all  six  succeeded.  The  first  feasible  and  ready  way  of 
collecting  a  revenue  through  taxation,  that  suggested  itself,  was 
by  duties  on  imports,  and  the  Texan  legislators  accordingly  took 
to  the  tariff  after  the  most  approved  American  fashion  ;  enacting 
a  given  rate  of  duties  on  the  12th  of  December,  revising  the  same 
on  the  15th,  and  making  a  new  tariff  on  the  27th.  In  the  ten 
years  that  Texas  existed  as  an  independent  republic,  it  had  no 
less  than  seven  distinct  tariffs. 

Export  duties  on  cotton  were  also  recommended.  The  chief 
reliance  of  the  government  was,  however,  upon  loans,  and  com- 
missioners were  early  appointed  to  borrow  one  million  of  dollars 
at  a  rate  not  exceeding  ten  per  cent.,  on  bonds  running  for  not 
less  than  five  or  more  than  ten  years ;  the  commissioners  being 
authorized  to  pledge  the  public  faith,  the  public  lands,  the  public 


6  PRACTICAL  ECONOMICS. 

revenues,  and  in  short  every  thing  that  Texas  possessed  in  the 
way  of  security,  for  their  repayment. 

The  idea  that  "  a  national  debt  was  a  national  blessing  "  was  one 
for  which  it  had  been  generally  supposed  an  agent  of  Jay  Cooke 
&  Co.,  employed  to  write  up  the  5-20  bonds,  in  1863,  was  entitled 
to  a  patent  for  originality ;  but  the  records  of  the  Congress  of 
Texas  show  that  the  unexpatriated  Yankee  was  after  all  but  a 
poor  though  probably  unconscious  imitator,  and  that  his  concep- 
tions of  the  felicity  of  owing  somebody  nationally  never  began  to 
rise  to  the  height  of  those  indulged  in  by  a  Mr.  Chenoweth,  who, 
as  chairman  of  the  national  committee  on  finance,  submitted  to 
the  first  Congress  on  the  16th  of  December,  1835,  a  report,  of 
which  the  following  is  an  extract : — 

"  At  present  our  indebtedness  is  small,  and  our  liabilities 
almost  entirely  to  private  individuals,  whose  claims,  your  com- 
mittee are  of  opinion,  may  properly  be  merged  and  cancelled  by 
the  creation  of  substantial  loans.  An  outstanding  national  debt 
may  in  many  respects  be  looked  upon  as  beneficial,  by  a  com- 
munity isolated  and  dependent  as  Texas,  if  the  creditors,  as  such, 
can  afford  us  substantial  patronage.  And  until  we  can  stand  im- 
mutable among  the  nations  of  the  earth,  your  committee  would 
advise  that  the  pecuniary  interests  of  our  creditors  will  excite  for  us 
the  sympathy  and  protection  of  mankind." 

In  one  sense  Mr.  Chenoweth's  " advice"  proved  correct,  though 
not  altogether  in  the  manner  he  anticipated ;  for  the  various  debt 
certificates  of  Texas  being  largely  disposed  of  in  the  United 
States,  an  earnest  sympathy  for  the  republic  was  thereby  naturally 
created  among  the  holders ;  and  this  sympathy  ultimately  was 
most  powerful  in  securing  the  annexation  of  Texas  to  the  United 
States,  and  subsequently  an  appropriation  from  Congress  of  the 
sum  of  $10,000,000,  with  the  understanding  that  the  same  should 
be  used  in  the  payment  of  the  debts  of  the  republic. 

Under  the  head  of  "  selling,"  as  an  expedient  for  providing 
ways  and  means,  the  public  lands  were  offered  by  the  Government 
of  Texas  at  low  prices  and  in  any  quantity;  but  as  the  cash  value 
of  the  article  was  small, — the  price  fixed  by  the  Mexican  Govern- 
ment before  the  war  being  less  than  four  cents  per  acre, — and  as, 
furthermore,  until  after  independence  was  fully  established  it 
was   a  question   whether   the   vendor   could   pass   an   adequate 


A   MODERN  FINANCIAL    UTOPIA,  7 

and  sufficient  title,  the  receipts  from  this  source  were  incon- 
siderable. 

Under  the  head  of  "  begging,"  the  foreign  agents  of  the 
republic  were  authorized  to  receive  money  or  donations  of  any 
kind  that  might  be  given  by  citizens  of  any  country  they  might 
visit ;  and  that  the  hat  thus  passed  round  did  not  return  empty  is 
evident  from  the  circumstance  that  on  the  30th  of  November, 
1835,  formal  resolutions  of  thanks  were  passed  by  the  council  to 
John  Hutchins  of  Natchez,  Mississippi,  for  his  liberal  donation 
of  one  hundred  dollars  "  for  the  use  of  Texas  in  her  struggle  for 
liberty." 

Under  the  head  of  "  robbing,"  the  council,  on  the  17th  of 
January,  1836,  enacted,  that  whereas  it  was  impossible  for  the 
troops  at  Bexar  "  to  drive  beeves  and  procure  provisions  for  their 
use  without  horses;  Therefore  be  it  resolved,  that  the  commandant 
be  authorized  to  employ  as  many  Mexicans,  or  other  citizens,  for 
the  purpose  of  driving  up  beeves,  and  procuring  provisions,  as 
may  be  required  for  that  purpose."  Letters  of  marque  and  re- 
prisal were  also  early  authorized  and  issued  ;  but  in  this  depart- 
ment of  robbery  the  Texans  could  plead  the  precedents  of  the 
best-established  and  most  Christian  governments. 

Under  the  heading  of  "  cheating,"  Mr.  Gouge  groups  the 
several  acts  and  proceedings  of  the  republic  in  respect  to 
the  manufacture  and  issue  of  paper  money.  The  national 
treasury  was  first  established,  so  far  as  the  election  of  a  treasurer 
could  establish  it,  in  November,  1835.  Previous  to  this 
there  had  been  a  fiscal  committee,  and  this  had  made  a  re- 
port, which,  as  the  first  official  financial  document  of  a  de  facto 
government,  destined  in  the  course  of  the  following  year  to 
come  into  possession  and  control  of  a  territory  larger  than 
France,  deserves  to  be  handed  down  to  posterity.  The 
report  related  to  a  matter  of  extortion  and  swindling  on  the 
part  of  certain  contractors,  and  alleged,  that  one  Thomas  Bray, 
for  furnishing  "  Cole's  company  of  wagoners  with  one  hundred 
and  seven  pounds  of  bread,  had  charged  twenty-five  cents  per 
pound,  or  twenty-six  dollars  and  seventy-five  cents,  whereas  he 
should  have  charged  but  fourteen  cents  per  pound ;  and  that  one 
Madison  M.  Stevens  had  charged  an  extortionate  sum  for  "  carry- 
ing one   express  to  Nacogdoches."     It  was  accordingly  recom- 


8  PRACTICAL  ECONOMICS. 

mended  that  Bray  be  allowed  but  fifteen  dollars  and  seventy-eight 
cents,  and  Stevens  but  ten  dollars  and  fifty  cents  in  full  of  all 
accounts,  and  the  report  was  ordered  to  lie  on  the  table.  A 
month  afterwards,  by  some  skill  of  manipulation  not  unworthy  of 
these  later  days,  the  committee  made  another  report,  in  which  it 
was  recommended  that  Messrs  Bray  and  Stevens  be  paid  in  full, 
— and  paid  in  full  they  probably  were.  How  good  a  field  there 
would  have  been  for  modern  adventurers  to  have  operated  in  is 
illustrated  by  the  following  extract  from  a  message  which  the 
first  governor,  Henry  Smith,  about  this  same  time  sent  in  to  the 
"Honorable  President  and  Members  of  the  General  Council \"  He 
says : — 

"  Instead  of  acting  as  becomes  the  counsellors  and  guardians 
of  a  free  people,  you  resolve  yourselves  into  low,  intriguing, 
caucusing  parties;  pass  resolutions  without  a  quorum,  predicated 
on  false  premises ;  and  if  you  could  only  deceive  me  enough,  you 
would  join  with  it  a  piratical  co-operation.  You  have  acted  in 
bad  faith,  and  seem  determined  by  your  acts  to  destroy  the  very 
constitution  you  are  pledged  and  sworn  to  support.  I  have  been 
placed  on  the  political  watch-tower,  and  I  hope  I  will  be  able  to 
prove  a  faithful  sentinel.  You  have  also  been  posted  as  sentinels; 
but  you  have  permitted  the  enemy  to  cross  the  lines,  and  you  are 
ready  to  sacrifice  your  country  at  the  shrine  of  plunder.  Mr. 
President,  I  speak  collectively,  as  you  all  form  one  whole,  though 
at  the  same  time  I  do  not  mean  all.  I  know  you  have  honest 
men  there;  but  you  have  Judas  in  the  camp — men  who,  if  pos- 
sible, would  deceive  their  God. 

"  Notwithstanding  their  deep-laid  plans  and  intrigues,  I  have 
not  been  asleep.  They  will  find  themselves  circumvented  in 
every  tack.  I  am  now  tired  of  watching  scoundrels  abroad  and 
scoundrels  at  home,  and  as  such  I  am  now  prepared  to  drop  the 
curtain. 

"  Look  around  upon  your  flock  ;  your  discernment  will  easily 
detect  the  scoundrels :  the  complaint,  contraction  of  the  eyes ; 
the  gape  of  the  mouth ;  the  vacant  stare ;  the  hung  head ;  the 
restless,  fidgety  disposition;  the  sneaking,  sycophantic  look;  a 
natural  meanness  of  countenance  ;  an  unguarded  shrug  of  the 
shoulders ;  a  sympathetic  tickling  and  contraction  of  the  muscles 
of  the  neck,  anticipating  a  rope ;  a  restless  uneasiness  to  adjourn, 


A  MODERN  FINANCIAL   UTOPIA.  9 

dreading  to  face  the  storm  themselves  have  raised.  Let  the 
honest  and  indignant  part  of  your  council  drive  the  wolves  out  of 
the  fold.  Some  of  them  have  been  thrown  out  of  folds  equally 
sacred,  and  should  be  denied  the  society  of  civilized  men. 

"  But,  thanks  be  to  my  God,  there  is  balm  in  Texas,  and  a 
physician  near." 

And  the  governor  then,  in  the  capacity  of  a  physician,  pro- 
ceeded to  administer  the  balm  by  ordering  the  council  to  be 
forthwith  prorogued,  "  unless  your  body  will  make  the  necessary 
acknowledgment  of  your  error,  and  forthwith "  (before  twelve 
o'clock  to-morrow)  "  proceed  H  (by  issuing  a  circular  and  furnish- 
ing expresses)  "  to  give  it  circulation  and  publicity,  in  a  manner 
calculated  to  counteract  its  baleful  effects." 

But  the  council  would  n't  be  prorogued,  and  refused  to  accept 
the  balm.  They  referred  the  governor's  message  to  a  committee, 
who  forthwith  reported :  "  That  they  are  unable  to  express  any 
other  views  than  indignation  at  language  so  repulsive  to  every 
moral  feeling  of  an  honorable  man,  and  astonishment  that  this 
community  should  have  been  so  miserably  deceived  in  selecting, 
for  the  high  office  of  governor,  a  man  whose  language  and  con- 
duct prove  his  early  habits  of  association  to  have  been  vulgar 
and  depraved."  The  report  concluded  with  resolutions  that  they 
would  sustain  the  dignity  of  the  government,  and  that  Henry 
Smith  be  ordered  forthwith  to  cease  the  functions  of  his  office. 
The  next  day  they  issued  an  address  to  the  people,  in  which  they 
repelled  the  charges  brought  against  them  in  "that  impudential 
document,"  and  brought  counter-charges  against  his  excellency 
himself.  A  single  paragraph  is  given  by  Mr.  Gouge  to  show  the 
character  of  this  address :  "  All  these  acts  of  stubbornness  and 
perverseness  were  not  sufficient  to  gratify  his  thirst  for  sole  do- 
minion. His  dignity  was  insulted  at  the  idea  of  the  existence  of 
the  co-ordinate  branch  of  government  to  curb  his  acts  and  check 
his  usurpation.  He  became  more  and  more  restless,  until, 
enraged  at  the  presumption  of  the  council,  in  the  exercise  of  a 
constitutional  right,  he  ignites ;  his  fury,  in  a  blaze,  consumes  his 
prudence  (what  he  had) ;  he  orders  the  council  to  disperse,  shuts 
the  door  of  communication  between  the  two  departments,  and 
proclaims  himself  the  government." 

At  this  rejoinder  and  counter-attack  Governor  Smith  seems  to 


10  PRACTICAL  ECONOMICS. 

have  been  considerably  astonished  ;  and  sought  to  reconcile  mat- 
ters with  the  council  by  sending  the  next  day  a  message,  in  which, 
after  confessing  that  he  had  used  "  much  asperity  of  language," 
he  concludes  as  follows: — 

"  Believing  the  rules  of  Christian  charity  require  us  to  bear  and 
forbear,  and  as  far  as  possible  overlook  the  errors  and  foibles  of 
each  other,  in  this  case  I  may  not  have  exercised  towards  your 
body  that  degree  of  forbearance  which  was  probably  your  due. 
If  so,  I  have  been  laboring  under  error,  and  as  such,  hope  you 
will  have  the  magnanimity  to  extend  it  to  me,  and  the  two 
branches  again  harmonize  to  the  promotion  of  the  true  interests 
of  the  country."  But  it  was  of  no  use ;  Governor  Smith's 
"  Christian  charity  "  was  exercised  too  late.  The  council  deposed 
him  so  far  as  they  could,  and  for  the  remainder  of  the  session 
Lieutenant-Governor  Robinson  "  reigned  in  his  stead." 

The  formal  establishment  of  a  national  treasury  was  one 
thing;  the  filling  it  with  money  was  quite  another  and  different 
thing.  And  as  sufficient  funds  for  defraying  the  expenses  of  the 
government  and  the  army  did  not  come  from  any  of  the  ex- 
pedients of  taxation,  loans,  the  establishment  of  companies  with 
banking  privileges,  the  sale  of  lands,  begging,  or  seizing  private 
property  by  land  and  sea,  the  republic  next  undertook  to  pay  its 
way  by  drawing  drafts  on  itself.  To  give  these  drafts  credit  and 
circulation  an  act  was  passed,  December,  1836:  "That  it  shall  be 
the  duty  of  the  several  collectors  (of  customs)  to  receive  the 
orders  of  the  auditor  upon  the  treasury  of  the  republic  when 
offered  by  importers  in  payment  of  duties  at  the  time  of  impor- 
tation" ;  and  in  June  following  it  was  enacted :  "  That  properly 
audited  drafts  on  the  treasury  of  the  republic  shall  be  received  in 
payment  of  taxes  imposed,  except  on  billiard  tables,  retailers  of 
liquors,  and  nine-pin  alleys,  or  games  of  that  kind."  By  these 
two  acts,  Texas  gave  her  audited  drafts  a  greater  value  than  they 
would  otherwise  have  possessed,  and  caused  them  to  pass  into 
hands  that  otherwise  would  not  have  received  them.  From  first 
to  last,  the  issue  of  these  audited  drafts  amounted  to  about  eight 
millions  of  dollars  ($7,834,207).  They  do  not  appear  to  have  ever 
to  any  extent  answered  the  purpose  of  currency;  and  the  circum- 
stance that  they  were  issued  for  odd  numbers  of  dollars  and  cents, 
and  when  passed   from   hand   to   hand    required   a   calculation, 


A  MODERN  FINANCIAL   UTOPIA.  1 1 

doubtless  contributed  to  prevent  such  a  result.  They  gradually 
depreciated  in  value,  and  in  December,  1837,  one  year  after  the 
passage  of  the  act  authorizing  their  reception  for  customs  dues, 
another  act  was  passed  declaring  that  the  state  would  no  longer 
receive  such  drafts  in  payment  of  debts  due  to  itself. 

The  greatest  and  best  stroke  of  financial  policy  on  the  part  of 
the  new  republic  was,  however,  reserved  to  the  last ;  and  in  No- 
vember, 1837,  when  borrowing,  begging,  selling  land  scrip,  and 
issuing  audited  drafts  had  been  exhausted  as  expedients  for  raising 
money,  the  government  commenced  the  issue  of  treasury  notes. 
These  notes  were  in  the  form  of  bank-notes,  and  by  law  were 
required  to  be  printed  "  in  neat  form."  They  were  also  for  round 
or  even  sums,  and  mainly  for  small  amounts,  and  specified  on 
their  face  "  that  they  will  be  received  in  payment  for  lands  and  other 
public  dues,  or  be  redeemed  with  any  moneys  in  the  treasury  not 
othertuise  appropriated" 

And  here  commences  by  far  the  most  valuable  of  all  the 
lessons  deducible  from  the  study  of  the  fiscal  experience  of  the 
Republic  of  Texas — a  lesson,  moreover,  exceptionally  interesting, 
from  the  circumstance  that  we  find  in  it  a. showing  and  demon- 
stration that  the  working  and  effect  of  a  system  of  irredeemable 
paper  money  is  one  and  the  same,  whether  the  field  of  its  influ- 
ence be  a  rich,  densely  populated  old  country  like  Austria  or 
France,  or  a  disturbed,  thinly  populated  community,  with  little 
accumulated  capital,  and  occupying,  as  it  were,  the  very  border 
line  between  barbarism  and  civilization. 

The  first  noticeable  and  most  interesting  fact  connected  with 
the  history  of  these  Texan  treasury  notes  is,  that  although  the 
credit  of  Texas  at  the  time  of  their  issue  was  so  bad  that  a  foreign 
loan  could  not  be  negotiated,  and  the  audited  drafts  on  the  treas- 
ury had  so  far  depreciated  as  to  have  but  a  nominal  value,  and 
that  of  less  than  fifteen  cents  on  the  dollar,  yet  the  notes  them- 
selves, though  practically  unredeemable,  were  when  first  issued  at 
par,  or  nearly  par,  with  specie,  and  furthermore  were  kept  so  for 
months,  or  until  their  issue  exceeded  in  amount  half  a  million  of 
dollars.  The  explanation  of  this  curious  phenomenon  is,  that  the 
people  of  Texas,  at  the  time  of  the  authorization  of  these  treasury 
notes,  had  practically  no  circulating  medium  for  effecting  ex- 
changes,  or   none   that   was   really   worthy   of  the    name ;    and 


12  PRACTICAL  ECONOMICS. 

although  a  community  can  get  along  in  its  business  without  a 
currency,  as  it  can  without  horses  and  carts,  ships  and  steam- 
engines — all  alike  instrumentalities  for  effecting  the  interchange 
of  commodities — there  is  no  community  that  will  dispense  with 
any  of  these  agencies  if  it  can  help  it.  With  the  outbreak  of  the 
revolution  the  hammered  money  and  the  eagle  money  soon  disap- 
peared. With  the  failure  of  the  banks  of  the  United  States  in 
1837,  the  notes  of  the  banking  institutions  of  the  Southwestern 
States,  which  had  come  in  like  a  flood  and  had  supplied  to  Texas 
the  void  occasioned  by  the  disappearance  of  its  specie  circulation, 
became  worthless  ;  while  the  issue  of  shin-plasters  or  fractional 
notes  of  persons  and  firms,  although  continued,  was  by  law  for- 
bidden. The  want  of  some  medium  that  should  have  one  value, 
and  would  regulate  prices  and  facilitate  exchanges,  was  therefore 
much  felt ;  and  when  the  government  gave  the  people  the  best 
medium  they  could,  threw  around  it  all  the  guaranties  that  it  was 
in  their  power  to  supply,  and  issued  no  more  of  the  "  medium  " 
than  was  necessary  to  meet  a  specific  want,  the  people  in  turn  ac- 
corded to  the  medium  a  value  proportional  to  the  work  it  performed, 
or  the  necessity  it  supplied.  The  first  issue  of  notes,  in  addition 
to  a  pledge  of  government  faith  to  receive  them  in  payment  of  all 
public  dues  and  to  redeem  them  as  soon  as  there  was  any  thing  to 
redeem  them  with,  carried  also  a  promise  of  ten  per  cent,  interest ; 
a  rate  easily  calculated,  and  which  offered  an  inducement  for 
hoarding  the  notes,  to  such  Texans  as  could  afford  it  and  had 
also  faith  in  their  ultimate  payment.  The  whole  revenue  from 
customs  was  also  devoted  to  sustaining  the  credit  of  these  treas- 
ury notes,  and  about  this  time  the  laws  for  raising  a  revenue  from 
imports  began  to  be  effective  ;  the  gross  revenue  accruing  from 
the  customs  for  the  quarter  ending  September  30,  1837,  having 
been  about  sixty  thousand  dollars. 

The  Texans  were,  moreover,  exceedingly  wise  in  their  day 
and  generation  in  another  matter.  The  original  treasury  notes, 
although  intended  to  serve  as  currency,  were  nevertheless,  from 
the  fact  that  they  carried  ten  per  cent,  interest,  in  reality  a 
species  of  national  "  bond  "  ;  and  being  issued  in  round  sums  of 
small  amounts,  as  low  even  as  one  dollar,  they  were  taken  up  as 
investments,  or  speculated  in  by  persons  of  very  small  means, 
who  never  regarded  themselves  in  any  sense  as  capitalists.     Very 


A   MODERN  FINANCIAL    UTOPIA.  1 3 

considerable  sums  thus  found  their  way  into  the  United  States 
and  were  permanently  held  there,  and  even  the  negroes  of  New 
Orleans  were  enabled  to  enjoy  the  luxury  of  speculating  in  foreign 
securities.  It  is  also  curious  to  recall  that  at  the  time  of  the  for- 
mation of  the  syndicate  in  1870-71,  for  the  purpose  of  funding 
the  national  debt  of  the  United  States  at  a  lower  rate  of  interest 
than  six  per  cent.,  this  very  same  plan  that  worked  so  successfully 
in  Texas  in  1837  was  brought  forward  and  urged  before  the  com- 
mittees of  Congress  with  great  ingenuity  and  ability  by  the  then 
head  of  a  European  banking  firm,  as  a  condition  precedent  and 
essential  to  placing  permanently  a  large  amount  of  Federal  secu- 
rities among  the  masses  in  Europe,  at  a  very  low  rate  of  interest. 
According  to  Mr.  Gouge,  Texas  treasury  notes  continued  to  be  at 
par,  or  nearly  at  par,  with  specie,  until  their  amount  exceeded 
half  a  million  of  dollars.  If  we  take  the  population  of  Texas  at 
that  time  as  about  forty  thousand,  and  suppose  that  one  fifth  of 
the  entire  issue  of  half  a  million  was  hoarded,  or  floated  off  into 
the  United  States,  then  the  result  affords  a  very  striking  and 
curious  confirmation  of  the  theory,  held  by  many  of  the  best 
informed  bankers  and  economists,  that  an  average  of  about  ten 
dollars  per  capita  is  the  utmost  limit  of  paper  money  that  a  com- 
munity can  permanently  float,  and  at  the  same  time  keep  on  a 
level  or  par  with  specie.1  It  is  also  a  fact  in  regard  to  the  Conti- 
nental money,  that,  so  long  as  its  issue  was  not  in  excess  of  thirty 
millions,  or  at  the  rate  of  about  ten  dollars  per  capita,  or  up  to 
January,  1778,  its  maximum  depreciation  was  not  in  excess  of  five 
per  cent.,  as  compared  with  specie. 

But  all  history  shows  that  when  a  nation  has  once  embarked 
in  a  scheme  of  irredeemable  paper  money,  it  is  extremely  difficult, 
if  not  wholly  impossible,  to  resist  the  current  and  drift  of  its 
influence ;  and  the  experience  of  Texas  constitutes  no  exception 
to  this  general  rule.  The  five  hundred  thousand  paper  treasury 
dollars  had  done  good  service ;  they  had  doubtless  been  printed 
in  a  "  neat  form  "  as  the  law  provided ;  had  proved  attractive  to 
the  masses,  and  had  relieved  the  most  urgent  financial  necessities 

1  The  theory  is  that  if  the  notes  are  redeemable  in  specie  on  demand,  and  more 
than  ten  dollars  per  capita  is  issued,  the  excess  will  be  presented  for  redemption  and 
be  thus  voluntarily  retired.  If  the  notes  are  not  redeemable  on  presentation,  the 
moment  the  line  of  excess  is  passed,  that  same  moment  indicates  the  commencement 
of  permanent  depreciation. 


14  PRACTICAL  ECONOMICS. 

of  the  republic.  Why  should  not  the  people  of  Texas  have  more 
of  so  good  a  thing  ?  They  accordingly,  through  their  legislative 
agents  and  representatives,  determined  to  have  more ;  and  in  the 
spring  of  1838,  a  bill,  bearing  the  familiar  title  of  "  An  act  to  define 
and  limit  the  issue  of  promissory  notes,''  was  reported  in  the  House 
of  Representatives,  which  authorized  an  additional  issue  of  one 
hundred  and  fifty  thousand  dollars.  The  Senate,  however,  in- 
creased the  existing  amount  to  one  million,  and  as  thus  amended, 
the  bill  passed  both  houses  by  large  majorities.  Sturdy  and 
honest  Sam  Houston  was  then  President,  and  when  the  bill  came 
up  for  his  signature,  he  promptly  vetoed  it,  and  gave  his  reasons 
therefor  in  a  message  so  full  of  common  sense  and  sound  princi- 
ples that  there  is  nothing  which  people  everywhere,  who  are  at- 
tracted by  the  idea  of  paper  money,  could  to-day  read  with 
greater  profit  and  instruction.  He  says  :  "  When  the  (treasury 
note)  currency  was  projected,  both  the  government  and  the 
country  were  without  resources.  National  existence  and  freedom 
had  been  achieved,  but  the  struggle  had  left  us  destitute  and 
naked.  There  were  no  banks !  There  was  no  money !  Our 
lands  could  not  be  sold,  and  the  public  credit  was  of  doubtful 
character  !  To  avoid  the  absolute  dissolution  of  the  government, 
it  became  necessary  to  resort  to  some  expedient  that  might  fur- 
nish temporary  relief.  This  could  only  be  effected  by  creating  a 
currency  that  should  command  some  degree  of  credit  abroad. 

"  It  was  hoped  and  believed  that,  if  a  small  issue  of  government 
paper  was  made,  with  specific  means  of  redemption  pointed  out, 
which  appeared  to  be  ample  and  well  guaranteed,  and  the  govern- 
ment should  evince  a  prudent  and  discreet  judgment  in  its  man- 
agement, it  would  command  such  articles  in  the  market  of  the 
United  States  as  were  indispensable  to  the  country. 

"  The  result  has  justified  the  expectation." 

But  he  continues,  and  his  words  are  as  full  of  truth  now  as 
then  :  "  The  government  will  never  be  able,  by  all  the  issues  it  can 
make,  to  satisfy  the  demands  of  private  speculation  and  interest. 
The  vast  issues  of  all  the  banks  in  the  United  States  (reference 
being  here  made  to  the  condition  of  things  in  1836-37),  in  their 
most  extended  condition,  failed  to  attain  this  object.  There  has 
not  probably  been  in  circulation  at  any  time  more  than  half  a 
million  of  dollars.     The  present  bill  requires  the  secretary  of  the 


A   MODERN  FINANCIAL    UTOPIA.  1 5 

treasury  to  increase  the  issue  to  a  million.  No  time  or  discretion 
is  allowed  to  that  officer.  The  circulation  of  the  country  is  to  be 
doubled  in  as  little  time  as  is  required  to  issue  the  paper." 

The  objections  of  the  executive  for  the  moment  prevailed  ; 
but  another  bill  was  passed  a  week  after,  which  allowed  the  presi- 
dent to  increase  the  amount  of  treasury  notes  to  one  million,  if  in 
his  judgment  the  interests  of  the  country  required  it ;  and  at  the 
same  time  it  specifically  appropriated  four  hundred  and  fifty 
thousand  of  such  notes,  or  an  amount  nearly  equal  to  the  whole 
existing  issue,  to  the  payment  of  army,  navy,  and  civil  indebted- 
ness. The  barriers  against  unlimited  inflation  were  thus  indirectly 
removed,  and  from  this  time  there  does  not  appear  to  have  been 
any  effort  to  restrain  further  action  in  this  direction.  The  first 
issues  of  these  notes,  as  already  stated,  carried  interest.  The  new 
issues  were  without  interest,  and  on  account  of  a  red  impression 
on  their  back,  were  everywhere  known  as  "  red-backs  " ;  thus  curi- 
ously anticipating  the  name — "  green-backs  " — applied  to  the 
paper  currency  of  a  later  generation. 

As  might  have  been  expected,  with  the  authorization  of  the 
new  issues  the  notes  began  to  depreciate  ;  and  the  depreciation 
increased  with  each  additional  emission.  In  all,  paper  money  in 
the  form  of  treasury  notes  to  the  nominal  amount  of  $4,717,939 
was  issued.  In  January,  1839,  these  notes  were  worth  no  more 
than  forty  cents  on  the  dollar ;  in  the  spring  of  1839  they  were 
worth  thirty-seven  and  a  half  cents ;  in  1841,  from  twelve  to  fif- 
teen cents;  and  in  1842  they  fell  to  ten  cents,  to  five  cents,  to 
four,  to  three,  to  two,  and  finally  became  utterly  worthless.  In 
the  characteristic  language  of  the  times,  it  required,  before  the 
close  of  President  Lamar's  administration,  "  fifteen  dollars  in 
treasury  notes  to  buy  three  glasses  of  brandy  and  water,  without 
sugar."  To  the  treasury  notes  succeeded  what  were  termed  "  ex- 
chequer bills  M  ;  but  they  were  comparatively  few  in  number,  and 
never  passed  to  any  extent  into  circulation.  "  By  this  time," 
says  Mr.  Gouge,  "  there  was  little  circulating  medium  of  any  kind 
in  Texas  ;  but  this  was  no  great  calamity,  as  the  people  had  but 
little  left  to  circulate.  The  evils  this  system  did  were  immense, 
and  such  as  for  which,  even  were  it  so  disposed,  the  government 
could  afford  no  compensation  to  the  sufferers.  They  no  doubt, 
however,  like  others  in  similar  circumstances,  attributed  to  the 


1 6  PRACTICAL  ECONOMICS. 

want  of  circulating  medium,  the  evils  they  suffered  from  want  of 
circulating  capital."  In  all,  from  first  to  last,  the  amount  of 
"  promissory  notes,"  "  audited  drafts,"  "  exchequer  bills,"  bonds, 
etc.,  issued  by  the  Texan  treasury,  and  serving  to  a  greater  or  less 
extent  as  "  circulating  medium,"  amounted  to  $13,318,145;  or, 
reckoning  the  population  at  fifty  thousand,  more  than  two  hun- 
dred and  sixty-six  dollars  per  capita.  If  paper  issues  could,  there- 
fore, have  made  a  people  rich,  the  Texans  ought  to  have  been  the 
richest  people  in  the  universe. 

One  other  thing  in  connection  with  this  subject  ought  specially 
to  be  mentioned  in  all  honor  to  the  Texans.  In  the  midst  of 
their  poverty,  and  crushed  almost  to  the  earth  with  their  burden 
of  financial  necessities,  they  never  made  their  government  paper 
a  legal  tender  in  the  payment  of  private  debts ;  but  every  man 
was  left  at  liberty  to  refuse  or  receive  treasury  notes  at  his 
option.  The  result  was,  that  when  "  red-backs"  were  almost  the 
exclusive  circulating  medium,  specie  was  the  standard  of  ultimate 
reference.  If  a  man  bought  an  article  on  credit,  he  gave  a  note 
promising  to  pay  dollars  in  silver,  or  so  many  treasury  notes  as 
should,  when  the  note  fell  due,  be  worth  an  equivalent  of  the 
amount  owed  in  silver. 

But  another  and  no  less  curious  part  of  this  history  yet  remains 
to  be  told.  The  experiment  of  paper  issues,  not  redeemable  in 
specie  on  demand,  to  supply  the  orifice  and  function  of  money,  or 
circulating  medium,  had  been  fully  and  fairly  tried  in  Texas,  and 
the  people,  one  and  all,  were  so  entirely  satisfied  with  their  ex- 
perience that  they  wanted  no  more  for  all  time  like  it.  They 
accordingly  did  not  content  themselves  with  mere  ordinary  legis- 
lation ;  but  when  the  convention  came  together,  immediately 
after  the  consummation  of  the  act  of  annexation  to  the  United 
States,  to  form  a  State  constitution,  the  delegates,  by  one  of  their 
earliest  acts,  inserted  in  the  constitution  the  following  sections, 
which  were  afterward  ratified  by  the  people  j : — 

1  The  movement  against  the  continued  use  of  paper  money,  in  fact,  commenced 
in  Texas  at  a  date  considerably  earlier  than  that  above  indicated  ;  the  last  President 
of  Texas,  Anson  Jones,  in  December,  1844,  using  in  his  inaugural  the  following  lan- 
guage :  "  The  fallacy  and  danger  of  a  factitious  paper  currency  having  been  demon- 
strated by  every  civilized  nation  upon  the  earth,  and  Texas  having  once  participated 
in  this  demonstration,  should  now,  when  she  is  able  to  do  so,  abandon  the  experiment 
and  resort  in  time  to  what  the  experience  of  the  past  has  conclusively  shown  to  be  the 


A   MODERN  FINANCIAL   UTOPIA.  1 7 

11  In  no  case  sJiall  the  Legislature  have  power  to  issue  '  treasury 
warrants,*  *  treasury-notes,'  or  paper  of  any  description  intended  to 
circulate  as  money" 

11  No  corporate  body  shall  hereafter  be  created,  renewed,  or 
extended,  with  banking  or  discounting  privileges." 

44  The  Legislature  shall  prohibit  by  law  individuals  from  issuing 
bills,  checks,  or  promissory  notes,  or  other  paper,  to  circulate  as 
money." 

44  It  is  never,"  says  Mr.  Gouge,  in  noticing  the  peculiarities  of 
this  constitution  of  Texas,  44  without  deep  experience  of  the  evils 
of  paper  issues  that  the  people  impose  such  restrictions  on  their 
rulers." 

And  the  first  Legislature  that  convened  after  the  adoption 
of  the  constitution,  or  in  the  succeeding  year,  made  the  following 
further  enactment : — 

•    "  No  person  or  persons  within  this  State  shall  issue  any  bill, 
promissory  note,  check,  or  other  paper,  to  circulate  as  money." 

44  Every  person  who  may  violate  this  act  shall  be  subject  to  in- 
dictment therefor,  by  a  grand  jury,  as  for  a  misdemeanor,  at  any 
time  within  twelve  months  after  so  offending ;  and  shall  be  sub- 
ject to  a  fine  of  not  less  than  ten  dollars,  nor  more  than  fifty  dol- 
lars, for  each  and  every  bill,  promissory  note,  check,  or  other 
paper,  issued  by  them  in  violation  of  the  first  section  of  this  act." 

These  measures  practically  put  an  end  to  the  paper-money 
system  of  Texas.  Various  subterfuges  were  afterward  resorted 
to,  and  by  means  of  them  paper  money,  to  a  very  limited  extent, 
found  its  way  into  circulation  in  Texas  after  its  annexation  to  the 
United  States.  But,  as  a  rule,  the  generations  of  Texans  who  had 
had  this  experience  of  44  fiat  paper  money "  never  again  looked 
with  favor  upon  any  other  currency  than  specie.  The  result  of 
such  a  policy  on  the  development  and  business  of  the  State  was 
thus  reported  by  Mr.  Gouge  in  1852, — seven  years  after  its  adop- 
tion :  44  The  result  of  this  hard-money  policy  is,  that  business  in 
Texas  rests  on  a  more  stable  foundation  than  it  does  in  many  other 

only  safe  expedient  for  governments — a  hard-money  currency  as  a  circulating  medium." 
In  accordance  with  this  recommendation,  the  Congress  of  Texas,  in  almost  one  of  its 
last  acts,  forbade  the  further  issue  by  the  government  of  "  any  description  of  paper 
representing  money  intended  for  circulation,  or  to  be  received  in  payment  of  any  class 
of  revenue  "  ;  and  required  the  secretary  to  cause  to  be  destroyed  all  the  exchequer 
bills  received  at  the  treasury  department. 


1 8  PRACTICAL  ECONOMICS. 

parts  of  the  Union.  That  it  is  absolutely  free  from  vicissitudes  is 
what  we  do  not  assert.  But,  unbolstered  by  bank-credits,  and 
governed  by  that  best  of  all  regulators,  gold  and  silver,  her  mer- 
chants limit  their  purchases  of  goods  abroad  by  the  actual  de- 
mands of  the  planters  at  home,  measuring  that  demand  by  the 
surplus  crops  the  planters  have  to  dispose  of.  Exchanges  are 
regular.  The  maximum  rates  never  exceed  the  cost  of  transport- 
ing specie,  and  often  fall  below  it.  A  gentleman  at  Austin  told  us 
that  he  had  in  the  course  of  years  negotiated  bills  on  New  York, 
to  the  amount  of  two  hundred  thousand  dollars,  and  had  seldom 
given  either  premium  or  discount.  At  Galveston,  exchanges  on 
New  York  have  not  for  years  been  at  any  time  more  than  one  and 
a  half  premium." 

Prices,  Mr.  Gouge  observes,  were  not  low,  but  quite  as  high  as 
they  are  (other  things  considered)  in  the  most  paper-loving  por- 
tions of  the  Union  ;  thus  showing  that  "  hard  money  and  high 
prices  are  not  incompatible." 

"  The  rate  of  interest  is  high,  because  the  profits  of  trade  are 
great.  Money  is  scarce,  as  money  ought  to  be,  for  without  scarcity 
it  would  lose  its  value.  But  gold  and  silver  is  in  Texas  quite  as 
plentiful,  in  proportion  to  other  circulating  wealth,  as  paper  money 
is  in  New  York  or  Massachusetts." 

Mr.  Gouge  also,  in  his  record,  brings  out  two  other  series  of 
facts  in  connection  with  the  history  of  the  paper  money  of  Texas, 
which  from  their  parallelism  with  results  obtained  on  a  larger 
scale,  but  under  similar  circumstances,  in  the  United  States  and 
other  countries,  are  especially  worthy  of  notice.  The  first  relates 
to  the  incentive  given  by  paper  money  to  national  extravagance 
and  increase  of  expenditures ;  and  in  this  respect  the  experience 
of  Texas  was  as  follows.  The  revolution  broke  out  in  1835. 
From  that  time  until  the  close  of  1838,  the  period  covering  the 
main  military  operations  and  the  practical  achievement  of  inde- 
pendence, the  Republic  of  Texas  incurred  a  debt  of  less  than  two 
millions  of  dollars.  This  small  amount  was  not  due  to  the  circum- 
stance that  the  government  had  any  objections  to  running  in 
debt;  "but  because  few  would  trust,  except  such  as  could  not 
well  avoid  so  doing."  In  1838,  Mirabeau  B.  Lamar  was  elected 
president,  and  held  orifice  for  three  years,  or  until  December,  1841. 
The  period  of  his  administration  was  one  of  comparative  peace, 


A   MODERN  FINANCIAL    UTOPIA,  19 

but  it  was  also  the  era  of  paper  money  and  profusion.  Lamar  in 
his  three  years'  term  increased  the  national  debt  from  less  than 
two  millions  to  upwards  of  seven  millions.  The  average  annual 
expenses  of  his  government  were  also  $1,618,405. 

In  1841  General  Houston  took  office  as  president  for  a  second 
term.  The  paper-money  bubble  had  exploded,  but  Mexican  hos- 
tilities, which  in  General  Lamar's  administration  only  threatened, 
now  actually  broke  out.  Yet  in  General  Houston's  last  adminis- 
tration not  only  was  the  national  debt  not  increased,  except  by  in- 
crements of  interest  and  by  the  bringing  in  of  back  accounts,  but 
the  average  annual  expenses  of  the  republic  were  reduced  from 
$1,618,405  to  $170,361.  Mr.  Gouge  claims  that  this  experience  of 
the  republic  under  President  Houston,  from  1842  to  1844  inclu- 
sive, shows  "  that  if  it  had  been  possible  for  the  Tcxans  to  be 
hard-money  and  prompt-payment  men,  they  might  have  achieved 
their  independence  and  defrayed  all  the  expenses  of  the  republic, 
at  a  cost  of  two  hundred  thousand  a  year.  But  the  Texans  never 
became  economical  until  constrained  by  necessity."  So  long  as 
they  could  borrow,  or  induce  any  one  to  take  their  paper  money, 
they  were  extravagant ;  but  when  they  could  borrow  no  longer, 
and  their  paper  money  refused  to  circulate,  then  they  became 
saving. 

The  second  series  of  facts  relates  to  the  influence  which  an  ex- 
cess of  paper  currency  in  Texas  exerted  in  encouraging  imports 
and  discouraging  exports.  Thus  during  the  administration  of 
Lamar, — 1839- 1840, — when  treasury  notes  were  the  circulating 
medium,  and  money  was,  as  it  is  termed,  "  abundant,"  the  im- 
ports were  nearly  six  times  as  great  as  the  exports ;  or  an  average  of 
$1,442,733  of  imports  per  annum  as  compared  with  an  average  of 
$247,459  of  exports.  On  the  contrary,  in  two  years  of  Houston's 
second  term,  1843-44,  when  such  notes  were  no  longer  current, 
the  exports  nearly  equalled  the  imports ;  the  average  annual  import 
being  $578,854  as  compared  with  an  average  annual  export  of 
$506,444. 

The  memory  of  the  events  and  experiences  thus  recorded  was 
furthermore  kept  alive  for  a  long  period  after  the  annexation  of 
Texas  (in  1845)  to  tne  United  States;  and  continued  to  exercise 
so  great  an  influence,  that  during  the  whole  period  of  the  Rebellion 
(1861-65)  the  paper  money  issued  by  the  Southern  Confederacy 


20  PRACTICAL  ECONOMICS. 

found  little  favor  among  the  people  of  that  State,  and  circulated 
only  under  the  pressure  of  military  law  and  of  necessity.  And 
even  after  the  war  was  ended,  and  the  supremacy  of  the  Federal 
Government  was  firmly  established  and  everywhere  acknowledged, 
it  was  found  very  difficult  for  a  long  time  to  make  the  average 
Texan  of  the  interior  recognize  the  green-back,  or  accept  any 
thing  but  specie  in  exchange  for  his  cotton  and  his  cattle. 


THE  TRUE  STORY  OF  THE   LEADEN   STATUARY; 

OR,  A  CURIOUS  CHAPTER  IN  ECONOMIC 

HISTORY. 

11  A  story  as  amusing  as  a  novel  is  scarcely  what  we  are  accustomed  to  expect  from 
the  sedate  pen  of  our  excellent  economist,  Mr.  David  A.  Wells.  But  that  is  pre- 
cisely what  we  are  indebted  to  him  for  this  morning,  as  the  brightest  of  our  fairest 
readers  will  admit,  who  hate  figures,  skip  statistics,  and  would  disclaim  the  ballot  if  it 
involved  learning  economics.  Mr.  Wells  has  dug  up  and  relates  for  us  the  True  Story 
of  the  Leaden  Statuary.  Its  moral  draws  itself,  as  in  the  case  of  all  good  and  well-told 
stories." — New  York  World,  May  n,  1874. 

THERE  is  an  amusing  old  story  told  of  the  magistrates  of  a 
certain  country  town  in  France,  who,  before  the  days  of 
street  lamps  and  gas,  and  as  a  better  security  against  the  unlawful 
act  of  "  vagrom  men,"  passed  an  ordinance  that  "  no  citizen  should 
walk  out  after  dark  without  a  lantern,"  and  that  disobedience  of  the 
law  should  entail  a  heavy  penalty.  The  watch,  vigilant  in  the  per- 
formance of  duty,  accordingly  arrested,  the  first  night  after  the 
law  took  effect,  a  well-known  and  estimable  individual,  but  of 
waggish  propensities,  and  hauled  him  up  before  the  local  Dogberry 
on  charge  of  having  broken  the  statute.  The  defendant,  however, 
on  being  asked  why  punishment  should  not  be  inflicted  upon  him, 
made  answer,  that  he  had  committed  no  offence,  and  in  support 
of  his  plea  produced  a  lantern.  It  being  rejoined  that  the  lantern 
had  no  candle,  he  next  declared  that  the  law  did  not  require  that  the 
lantern  should  contain  any  candle  ;  and  the  statute  being  examined 
and  the  defence  found  valid,  the  arrested  party  was  dismissed  and 
the  law  so  amended  as  to  read,  "  that  no  citizen  should  hereafter 
walk  out  after  dark,  without  a  lantern  and  a  candle."  The  next 
night  the  same  person  being  again  found  walking  in  darkness 
was  again  arrested  and  arraigned,  but  as  before  maintained  that 
he  had  committed  no  offence  ;  and,  in  proof  thereof,  produced  a 
lantern  and  showed  that  it  contained  a  candle.   "  But  the  candle," 

21 


22  PRACTICAL  ECONOMICS. 

said  Dogberry,  "is  not  lighted."  "And  the  law,"  rejoined  the 
wag,  "  does  not  require  that  it  should  be";  and  this  interpre- 
tation being  found  correct,  the  accused  was  once  more  discharged 
and  the  statute  further  amended  so  as  to  read,  "  that  no  citizen 
should  hereafter  walk  out  after  dark  without  a  lantern  and  a 
candle  in  it,  and  that  the  candle  should  be  lighted." 

But  the  very  next  night  the  same  incorrigible  and  troublesome 
person  was  again  brought  up  before  the  Court,  and  this  time  both 
watch  and  magistrate  thought  they  had  a  sure  thing  of  it ;  for,  to 
all  appearances,  he  had  not  on  this  occasion  made  even  a  pretence 
of  complying  with  the  law.  The  triumph  of  the  officials  was, 
however,  of  very  brief  duration,  for,  to  their  utter  disgust  and 
amazement,  the  accused  drew  from  his  capacious  coat  pocket 
a  dark  lantern,  and  showed  that  it  not  only  contained  a  candle, 
but  that  the  candle  was  lighted  and  burning.  Warned  by  this 
threefold  experience,  the  statute  was  for  a  third  time  amended, 
and  this  time  so  fully  and  clearly  that  no  further  practical 
jokes  were  attempted,  and  the  majesty  of  the  law  remained 
unassailed. 

As  thus  told  the  above  story  is  manifestly  a  broad  burlesque, 
even  in  its  application  to  stupid  French  "  country  officials,"  and 
without  further  foundation  than  the  imagination  of  its  author. 
But  it  is  nevertheless  a  most  curious  and  amusing  circumstance 
that  it  has  been  reserved  to  the  United  States  to  furnish  out  of 
the  history  of  its  fiscal  legislation  a  record  of  actual  experience 
which,  in  many  respects,  is  the  exact  and  truthful  counterpart  of 
the  French  burlesque;  and,  as  the  incidents  involved  have  often 
(but  always  incorrectly)  been  alluded  to  on  the  floor  of  Congress, 
and  in  the  columns  of  the  Press,  and  may  be  found  pertinent  to 
prospective  legislation  and  debate  in  respect  to  custom-house  re- 
forms and  irregularities  in  all  countries,  it  is  proposed  to  now  em- 
body them  for  the  first  time,  and,  as  a  contribution  to  economic 
literature,  in  the  form  of  a  complete  narration. 

Between  the  years  1816  and  1828,  encouraged  by  the  imposi- 
tion of  a  low  duty  on  imported  metallic  lead,  the  manufacture  of 
white  lead  as  a  basis  for  paints  came  into  existence  in  the  United 
States  and  developed  with  great  rapidity,  the  principal  seats  of 
the  business  being  the  cities  of  New  York,  Philadelphia,  and 
Baltimore.     But  about  the  years  1826-28  the  discovery  of  the 


THE    TRUE   STORY  OF  THE  LEADEN  STATUARY.  2% 

lead  mines  at  Galena,  111.,  became  generally  known,  and  as  the 
first  reports  were  to  the  effect  that  the  deposits  were  of  such  un- 
paralleled richness,  purity,  magnitude,  and  easy  accessibility  as  to 
make  it  only  a  question  of  time  when  the  whole  world,  from  sheer 
inability  to  compete,  would  become  wholly  dependent  for  its  sup- 
plies of  lead  on  this  one  locality,  it  was  at  once  considered  desir- 
able by  many  people  to  establish,  so  far  as  fiscal  legislation  could 
do  it,  a  most  extraordinary  economic  principle,  and  one  which, 
from  that  day  to  this,  has  proved  popular  in  all  tariff  enactments 
in  the  United  States  ;  and  this  was  to  make  the  discovery  or 
recognition  of  the  existence  of  any  great  natural  advantages — 
either  in  the  way  of  mines,  soils,  climatic  advantages,  forests, 
means  of  intercommunication  or  national  characteristics — the 
immediate  occasion  for  cursing  the  country  by  the  creation  and 
imposition  of  some  new  tax,  thereby  making  dear  what  was  be- 
fore cheap,  and  endeavoring  to  work  up  to  a  state  of  abundance 
through  conditions  of  scarcity,  artificially  created  and  unneces- 
sarily perpetuated.  In  this  particular  instance  the  principle  was 
exemplified  by  raising  the  duty  on  lead  imported  in  pigs  and  bars 
from  one  cent  a  pound  to  three  cents;  and  to  this  extent  increas- 
ing to  the  consumer  the  price  of  the  raw  material,  whether  of 
foreign  or  domestic  origin,  and  of  all  manufactured  products  in 
which  lead  entered  as  the  principal  constituent.1      As  the  duty 

1  Among  other  illustrations  to  the  same  effect,  drawn  from  actual  and  subsequent 
experiences,  the  following  are  especially  worthy  of  mention.  From  the  foundation  of  the 
government  to  the  outbreak  of  the  civil  war  in  1861,  the  imports  of  crude  or  unmanu- 
factured copper  into  the  United  States  were  free,  or  subject  to  a  mere  nominal  duty. 
In  1S61,  however,  in  order  to  help  meet  the  enormous  expenditures  occasioned  by  the 
war,  a  duty  of  2  cents  per  pound  on  such  imports  was  imposed  ;  but  subsequently,  and 
after  the  requirements  for  war  expenditures  had  ceased,  at  the  demand  of  the  owners  of 
the  richest  copper  mines  in  the  world  (which  had  been  discovered  on  public  lands  on 
Lake  Superior,  and  sold  by  the  government  for  a  mere  nominal  price),  the  duty  was 
increased  to  5  cents  per  pound  ;  a  rate  so  prohibitory,  that  in  1878  only  one  pound  of 
foreign  copper,  yielding  a  revenue  to  the  treasury  of  5  cents,  was  imported.  The 
further  results  of  such  legislation  were,  that  the  owners  of  the  Lake  Superior  mines, 
on  an  investment  of  a  few  hundred  thousand  dollars,  received  from  fifteen  to  twenty 
millions  of  dollars  in  dividends  ;  copper  was  made  higher  in  price  in  the  United  States 
than  in  any  other  civilized  country  ;  and  the  product  of  the  mines  being  in  excess  of 
any  domestic  demand,  the  resulting  surplus  was  regularly  sold  in  Europe  at  a  much 
less  price  than  the  mine  owners  controlling  the  domestic  market  would  allow  it  to  be 
sold  to  the  American  consumers.  And  so  the  discovery  of  these  rich  mines  of  Lake 
Superior,  on  the  public  lands  of  the  nation,  in  place  of  having  proved  a  benefit,  have 
actually  resulted  in  misfortune  and  detriment  of  the  whole  people.  Similar  experiences, 


24      ,  PRACTICAL  ECONOMICS. 

was  not  at  the  same  time  correspondingly  advanced  on  the  import 
of  white  lead,  and  as  the  lead-mining  interests  of  Galena  were  not 
prepared  to  supply  at  any  price  the  immediate  demand  thus 
artificially  created  for  their  products  in  the  domestic  market,  the 
American  manufacturers  of  white  lead  all  at  once  found  their 
business  threatened  with  utter  destruction  ;  and,  with  intellects 
preternaturally  sharpened  by  a  prospective  loss  of  a  large  invested 
capital,  they  looked  shrewdly  about  to  see  in  what  manner  they 
could  save  and  protect  themselves. 

And  putting  on  their  spectacles,  and  scrutinizing  carefully 
the  entire  tariff,  as  modified  by  the  special  act  of  1828  referred 
to,  they  soon  discovered  that  the  government,  while  effectually 
closing  and  barring  up  the  big  door  by  which  foreign  lead  could 
be  imported,  had  inadvertently  left  wide  open  a  smaller  door 
beside  it,  inasmuch  as  while  Congress  had  prescribed  a  duty  of 
three  cents  per  pound  on  lead  imported  in  pigs  and  bars,  they  left 
a  prior  duty  of  fifteen  per  cent,  ad  valorem  on  the  import  of  old 
lead  fit  only  to  be  manufactured,  unrepealed  and  in  force.  Those 
were  the  days  of  packet  ships  and  slow  communication  with  the 
Old  World  ;  but  we  may  readily  believe  that  no  time  was  un- 
necessarily wasted  by  those  interested  in  this  discovery ;  and  at 
the  earliest  practicable  moment  afterwards  agents  of  nearly 
every  important  American  house  engaged  in  the  importation  of 
metals— Barclay  &  Livingston,  Boorman,  Johnson,  &  Co.,  Hoff- 
man, Bend,  &  Co.,  Phelps  &  Peck,  William  Wright  &  Co.,  and 
many  lesser  firms — were  ransacking  the  markets  of  Europe  for 
the  purchase  and  shipment  to  the  United  States  of  old  lead.  Of 
course,  the  legitimate  market  supplies,  never  great,  of  this  pecu- 
liar article  soon  gave  out,  but  the  agents  and  correspondents  of 
the  American  houses  being  Yankees,  proved  fully  equal  to  the 
emergency,  and  a  scheme  was  forthwith  devised  to  replenish  the 

though  on  a  smaller  scale,  have  in  like  manner  followed  the  discovery  in  the  United 
States  of  rich  mines  of  bichromate  of  iron  (from  which  chromate  of  potash,  and  yellow 
and  green  paints  are  made)  and  of  nickel  ;  and  would  also  undoubtedly  have  been  the 
case  with  tin,  had  this  metal  been  discovered  in  former  years.  For  when,  about  the  year 
1870,  enormous  deposits  of  tin  were  reported  to  have  been  found  in  the  Ozarck  Moun- 
tains of  Missouri,  attempts  were  at  once  made,  on  the  mere  basis  of  report,  to  remove 
tin  as  an  importation  from  the  free  list,  and  make  it  subject  to  a  duty  ;  and  the  effort 
was  only  abandoned  when  it  was  ascertained  that  what  was  supposed  to  be  tin,  was 
something  else,  and  of  no  value. 


THE    TRUE  STORY  OF  THE  LEADEN  STATUARY.  2$ 

stock  by  exchanging  new  lead  for  old,  and  contracts  in  more  than 
one  instance,  for  example,  were  actually  entered  into  and  carried 
out  for  stripping  from  extensive  factories  in  different  parts  of 
England  their  old  lead  roofing — lead  being  then  used  more  exten- 
sively than  now  in  the  place  of  slate — and  replacing  it  without 
expense  to  the  owners  with  new  roofing  on  condition  of  receiving 
the  old  material. 

In  the  course  of  time  the  old  lead  thus  collected  began  to 
make  its  appearance  on  this  side  of  the  Atlantic,  and  arriving  in 
large  quantities — almost  by  the  ship-load — at  the  ports  of  New 
York  and  Boston,  naturally  attracted  the  attention  of  the  custom- 
house authorities,  who  at  first  demurred  to  its. entry  at  the  low 
duty  of  15  per  cent,  ad  valorem.  The  matter,  however,  being 
referred  to  the  Treasury  Department  at  Washington,  an  answer 
soon  came  back  that  the  position  of  the  merchants  was  unim- 
peachable, but  the  Department  would  have  the  law  amended  as 
soon  as  possible. 

But  the  merchants  by  this  time,  in  studying  up  the  fiscal 
legislation  of  Congress  in  respect  to  lead  in  pigs  and  old  lead,  had 
made  another  discovery — and  that  was  that  the  tariff  act  in  force 
was  mandatory  to  this  further  effect,  namely,  that  if  any  person 
or  persons  should  import  musket  balls  or  leaden  bullets  into  the 
United  States  they  should  pay  to  the  customs  authorities  a  duty 
on  the  same  of  15  per  cent,  ad  valorem,  and,  in  default  thereof, 
the  goods  should  be  forfeited  and  the  importers  be  punished. 
Like  good  citizens,  therefore,  the  merchants  made  haste  to  obey 
the  law,  and  their  agents  in  Europe  being  duly  instructed,  lost  no 
time  in  buying  up  all  the  musket  balls  and  leaden  bullets  they 
could  find  for  sale,  and  when  the  foreign  markets  were  exhausted 
they  had  musket  balls  of  the  regulation  weight  and  calibre  largely 
manufactured,  and  all  were  duly  shipped  as  fast  as  possible  to  the 
United  States.  Again  the  custom-house  authorities  objected,  but 
again  came  back  the  response  from  Washington  that  the  law  was 
explicit  in  respect  to  the  15-per-cent.  duty,  and  that  nothing  could 
be  done  in  the  way  of  restraining  the  importation  of  leaden 
bullets  in  place  of  pig  lead  until  Congress  had  provided  further 
legislation  on  the  subject. 

But  the  tariff  acts  in  force  from  1828  to  1832  were,  however, 
almost  as  much  a  mystery  and  a  muddle  of  perplexity  as  are  the 


26  PRACTICAL  ECONOMICS. 

acts  under  which  the  customs  are  at  present  administered,  and  it 
was  only  after  continuous  study  and  investigation  that  their  full 
depth  of  meaning  and  of  wisdom  could  become  evident.  But  the 
success  attending  the  import  of  old  lead  and  musket  balls  had 
been  so  remarkable,  and  the  preservation  and  resuscitation  of  the 
"  white  lead  "  business  so  encouraging,  that  the  merchants  were 
stimulated  to  further  fiscal  investigations ;  and  again  putting  on 
their  spectacles,  they  discovered  two  other  remarkable  provisions 
of  the  then  existing  tariff  which  heretofore  had  not  been  consid- 
ered of  much  importance.  These  provisions  related,  the  one  to 
"  leaden  weights  "  of  all  descriptions,  and  the  other  to  "  sounding 
leads,"  and  were  to  the  effect  that  if  any  person  imported  any  of 
these  articles  into  the  United  States  he  should  pay  on  the  same  a 
duty  of  fifteen  per  cent,  ad  valorem. 

It  seems  almost  unnecessary  to  relate  in  detail  the  consequence 
of  these  discoveries,  but  it  sufficeth  to  say  that  those  were  the 
good  old  days  when  false  standards  were  far  more  of  an  abomina- 
tion than  they  now  are,  and  it  was  astonishing  how  great  a  de- 
mand all  at  once  appeared  to  have  been  created  in  the  United 
States  for  full,  fresh,  and  new  sets  of  leaden  weights  (from  half  an 
ounce  to  fifty-six  pounds  and  upward,  but  notably  of  the  heavier 
denominations),  which  had  not  had  their  accuracy  impaired  by 
continuous  use  and  abrasion.  If  the  exact  truth,  moreover,  could 
now  be  known,  it  might  also  appear  that  many  persons  at  that 
time  (especially  in  the  cities  of  New  York  and  Boston)  had  some- 
how become  indoctrinated  with  the  idea  that  the  possession  of 
more  "  weights "  would  in  some  way  increase  the  quantity  of 
things  to  be  weighed — in  the  same  way  as  the  progressive  men  of 
the  present  day  have  brought  themselves  to  believe  that  the  pos- 
session of  more  paper  money  will  increase  the  value  and  quantity 
of  the  things  that  this  same  money  can  buy.  Those  were  the  days, 
also,  when  clocks  were  high  and  stood  in  corners  rather  than  upon 
mantels,  and  were  moved  by  weights  rather  than  by  springs,  and 
our  ancestors  of  forty  years  ago — and  none  knew  better  than  they 
that  "  time  is  money  " — all  at  once  seemed  possessed  with  the  de- 
sire to  have  more  clocks,  for  the  import  of  heavy  leaden  clock- 
weights,  with  iron  hooks  neatly  fitted  to  one  end,  and  which 
prima  facie  could  be  only  used  for  the  manufacture  of  clocks,  all 
at  once  increased  and  rapidly  became  a  business  of  magnitude. 


THE   TRUE  STORY  OF   THE  LEADEN  STATUARY.  27 

Navigators  also  about  this  time,  it  might  be  inferred,  became 
more  intelligent ;  or,  if  not  more  intelligent,  then,  through  a  de- 
sire to  save  their  insurance  premiums,  more  cautious ;  or,  if  not 
these,  then  the  desire  of  American  geographical  students  to  study 
more  accurately  the  sea  bottom,  might  have  been  abnormally 
stimulated  ;  for  in  what  other  way  could  an  excessive  and  unusual 
import  of  deep-sea  sounding  leads  be  accounted  for  ? — leads 
small,  leads  large,  leads  of  two  ounces  weight,  leads  of  seventy 
pounds  weight,  leads  a  few  inches  in  length  up  to  leads  two  feet  in 
length — all  with  an  eyelet  at  one  end  for  the  sounding  line  attach- 
ment and  a  cavity  at  the  other  for  the  reception  of  the  tallow,  by 
the  agency  of  which  specimens  were  to  be  brought  up  from  the 
sea  bottom. 

But  the  custom-house  authorities  were  practical  men.  They 
indulged  in  no  philosophical  reflections  as  to  any  abstract  possible 
uses  of  the  imported  articles  in  question.  They  saw  in  all  of  them 
lead  and  lead  only — and  on  lead,  in  the  interests  of  the  Galena 
mines  and  of  the  revenue,  they  wanted  a  duty  of  three  cents  per 
pound.  They  accordingly,  as  opportunity  offered,  seized  and  re- 
fused to  deliver  the  exceptionally  large  invoices  of  "clock 
weights,"  "  scale  weights,"  and  "  sounding  leads,"  and  the  appeal, 
as  usual,  from  their  proceedings  went  up  from  the  merchants  to 
Washington.  But  if  the  custom-house  officials  were  practical 
men,  the  Treasury  magnates  at  the  capital,  on  the  other  hand, 
were  strict  constructionists,  and  as  they  found  the  statute  written 
so  they  interpreted  it ;  and  in  all  cases  the  arrested  importations 
of  the  merchants  were,  after  a  little  delay,  restored  and  admitted 
to  entry  ;  and  in  at  least  one  case,  where  three  cents  per  pound 
had  been  paid  under  protest  on  the  above-mentioned  leaden 
articles,  the  difference  between  that  sum  and  fifteen  percent,  was 
returned  to  the  merchant  by  the  Treasury.  In  fact,  as  "  sea 
stores  "  of  all  descriptions  were  then  on  the  free  list,  "sounding 
leads  "  might  have  been  claimed  to  be  exempt  from  all  imposts ; 
but  the  merchants  were  generous,  and  this  question  does  not 
appear  to  have  been  raised. 

It  is  not  to  be  denied,  nevertheless,  that  by  this  time  lead  had 
got  to  be  a  very  irritating  topic  to  a  Federal  official ;  and  indeed 
it  was  only  necessary  to  say  "  lead  "  to  a  United  States  district 
attorney,  a  collector,  or  revenue  inspector,  to  seriously  disturb  his 


28  PRACTICAL  ECONOMICS. 

mental  equanimity.  An  opportunity  to  retaliate  upon  their  mer- 
cantile tormentors  was  therefore  earnestly  sought  for,  and  before 
long  such  an  opportunity  seemed  to  present  itself.  A  prominent 
New  York  house  in  the  metal  trade,  which,  in  connection  with 
some  half  dozen  or  more  leading  firms,  had  been  engaged  in  im- 
porting old  lead,  musket  bullets,  sounding  leads,  clock  weights, 
and  the  like,  and  passing  them,  under  a  strict  but  legal  construc- 
tion of  the  statute,  at  fifteen  per  cent,  ad  valorem,  imported  on 
one  occasion,  during  the  period  under  consideration,  but  subse- 
quent to  the  events  narrated,  an  invoice  of  stereotype  metal. 
Now,  stereotype  metal  was  then  on  the  free  list  of  the  tariff,  and 
subject  to  no  duty,  and  in  this  particular  instance  the  importa- 
tion had  been  made  in  consequence  of  a  direct  order  received 
from  one  of  the  largest  type  founders  in  New  York  ;  but  as  it 
came  in  pigs  or  bars,  was  in  unusual  quantity,  and  consisted 
merely  of  lead  mixed  with  comparatively  small  proportions  of 
antimony  and  bismuth,  the  custom-house  officials  conceived  the 
idea  that  it  was  only  a  new  device  of  the  enemy  to  take  advan- 
tage of  the  faulty  statute,  and  that  the  ultimate  intent  was  to  re- 
melt  the  stereotype  metal,  separate  its  several  constituents,  and 
then  dispose  of  the  lead  independently.  The  whole  invoice  was 
accordingly  seized,  and  suit  commenced  in  the  United  States 
District  Court  for  its  forfeiture,  the  government  having  previously 
ascertained,  by  means  of  an  analysis  of  a  sample  bar,  made  at  their 
request  by  the  then  famous  New  York  chemist,  old  Dr.  Chilton, 
that  the  metal  contained  somewhat  more  than  eighty  per  cent,  of 
lead.  The  District  Attorney  at  that  time  was  Price,  afterward 
best  known  for  some  financial  irregularities.  The  merchants,  of 
course,  resisted,  and  on  the  day  of  trial  appeared  in  court  with 
the  type  founder  on  whose  account  the  metal  was  ordered,  and 
other  experts  to  prove  that  the  import  and  prospective  use  of  the 
metal  were  entirely  legitimate.  The  government  opened  their 
case  by  stating  their  assumption  that  the  metal  was  not  imported 
for  the  manufacture  of  stereotypes,  but  for  the  purpose  of  de- 
frauding the  revenue,  and,  calling  as  their  first  witness  Dr.  Chil- 
ton, examined  him  somewhat  as  follows : 

District  Attorney — What  is  your  profession  ?  Dr.  Chilton — A 
chemist. 

Q.  Where  were  you  educated?  A.  In  Edinburgh,  and  have 
followed  for  many  years  my  profession  in  New  York. 


THE   TRUE  STORY  OF  THE  LEADEN  STATUARY.  29 

Q.  Have  you  made  an  analysis  of  this  imported  metal  [at  the 
same  time  referring  to  one  of  the  bars  included  in  the  invoice]? 
A.  I  have. 

Q.  Of  what  does  it  consist  ?  A.  Of  some  eighty  per  cent,  of 
lead  ;  the  remainder,  antimony,  bismuth,  and  tin. 

Q.  Is  it  possible  to  separate  these  several  constituents,  as 
thus  mixed,  so  as  to  use  and  sell  them  separately?  A.  Per- 
fectly so. 

Q.  Please  tell  the  Court  what,  in  your  opinion,  would  be 
about  the  expense  of  the  operation.  A.  Rather  more  than  all 
the  materials  are  worth. 

There  was  silence  for  a  few  moments.  The  District  Attorney 
did  not  seem  to  be  possessed  of  a  further  inquiring  spirit.  It  was 
a  warm  summer's  day,  and  the  Judge  (Betts),  after  mopping  his 
face  with  his  handkerchief,  stretched  his  head  forward,  and,  some- 
what brusquely,  asked  if  Mr.  Price  had  any  rebutting  testimony, 
and,  on  receiving  a  negative  reply,  fell  back  in  his  chair  with  the 
remark :  "  Then  the  case  had  better  be  dismissed."  And  dis- 
missed it  was. 

But  the  troubles  of  the  custom-house  officials  were  not  yet 
ended  ;  and  here  comes  in  that  portion  of  this  curious  series  of 
events  which  is  best  known  to  the  public,  is  the  most  comi- 
cal, and  which,  as  has  already  been  remarked,  is  often  referred  to 
in  Congressional  debates,  when  topics  of  the  tariff,  smuggling,  or 
under  valuations  are  under  consideration. 

The  wicked  merchants,  encouraged  by  their  complete  success 
as  law  interpreters,  had  continued  their  tariff  investigations,  and 
had  further  found  among  its  provisions  in  force  one  to  the  effect 
that  "  metal  statuary  and  busts  "  might  be  imported  free  of  duty. 
It  was  thereupon  immediately  determined  by  the  merchants  that 
if  the  American  people  desired  to  cultivate  their  taste,  or  keep 
alive  the  memory  of  the  good  and  great  of  former  days  by  adorn- 
ing their  houses  and  grounds  with  metal  statuary,  they  ought  to 
have  the  opportunity  of  so  doing ;  and,  accordingly,  large  orders 
were  sent  to  Europe — at  that  time  the  exclusive  seat  of  high  art 
— for  the  manufacture  of  busts — mainly  colossal — of  Washington 
Lafayette,  Napoleon,  Moses,  and  the  prophets,  and  not  forgetting, 
also,  duplicates  or  reproductions  of  the  great  works  of  antiquity; 
and  as  lead,  of  all  the  metals,  seemed  to  possess  in  the  highest  de- 


30  PRACTICAL  ECONOMICS. 

gree  the  qualities  of  durability,  tenacity,  cheapness,  and  facility  of 
being  moulded,  the  statuary  in  question  was  directed  to  be  made 
of  lead.  It  should  also  be  remarked  in  this  connection  that  lead 
statuary  fifty  years  ago  was  not  the  abnormal  exceptional  thing  it 
now  is.  In  fact  it  was  then  the  common  material  for  cheap 
imagery  throughout  Europe,  when  something  less  expensive  than 
bronze  or  marble  was  desired,  and  filled  the  place  which  is  now 
supplied  by  cast  iron  and  zinc,  but  which  materials  fifty  years  ago 
were  not  thought  susceptible  of  ornamental  adaptation.  And 
that  the  lead  statuary  in  question  was  really  ornamental  is  proved 
by  the  circumstance  that  some  of  it  thus  imported  is  yet  in  use 
for  ornamental  purposes,  one  piece  embellishing,  as  recently  as 
1874,  the  garden  of  an  eminent  banker  in  New  York.  From  such 
an  aesthetic  point  of  view,  also,  did  the  prosaic  custom-house  offi- 
cers regard  the  first  importations  of  these  leaden  images,  and  so 
might  they  long  have  continued  to  regard  them,  had  the  persons  in 
Europe  intrusted  with  their  shipment  been  more  careful  in  respect 
of  packing.  But  when  Washington  came  up  out  of  the  hold  of  the 
vessel  after  a  rough  voyage  with  his  nose  punched  in,  and  Napo- 
leon with  his  eyes  sufficiently  askew  to  require  an  operation  for 
strabismus,  and  Moses  looking  very  much  like  a  subject  on  whom 
the  law  ought  to  be  administered  rather  than  an  author  and  ad- 
ministrator of  the  law,  suspicion  was  naturally  excited,  and  forth- 
with the  statuary  was  seized  and  held  for  forfeiture  by  the  customs 
authorities.  In  answer,  the  importers,  as  before,  pointed  to  the 
clear  and  explicit  provision  of  the  tariff  then  in  force — "  Metal 
statuary  and  busts  free  " — and  urged  the  government,  if  they 
doubted,  to  institute  a  suit.  But  Mr.  Price,  the  district  attorney, 
had  once  burned  his  fingers  with  cold  lead,  and  persistently  re- 
fused to  bring  the  matter  into  court.  Thereupon  one  of  New 
York's  then  best-known  merchants  and  publicists,  caused  an  in- 
voice of  the  questionable  statuary  to  be  imported  into  Boston, 
and  arranged  with  the  district  attorney  of  that  port  to  try  the 
issue  in  respect  to  its  dutiable  character.  When  the  trial  came 
on  Daniel  Webster  appeared  as  counsel  for  the  defence.  His 
speech  in  answer  to  government  was  very  brief  but  to  the  point, 
claiming  the  law  provided  for  the  admission  of  metal  statuary, 
busts,  etc.,  free,  with  no  limit  as  to  the  kind  or  quantity,  and  that 
the  imports  in  question  were  metal  statuary,  though  made  of  lead. 


THE    TRUE  STORY  OF  THE  LEADEN  STATUARY.  3 1 

When  the  case  closed  Mr.  Webster  requested  the  judge  to  charge 
the  jury  that  they  were  to  decide  whether  the  articles  were  metal 
statuary,  and  if  they  found  that  they  were,  they  must  bring  in  a 
verdict  for  the  defendants.  The  judge  substantially  did  as  re- 
quested, and  the  jury,  in  a  few  minutes  after  retiring,  returned 
with  a  verdict  for  Mr.  Lcavitt. 

The  decision  in  this  case  practically  put  an  end  to  the  whole 
controversy.  The  lead  statuary  under  seizure  was  released,  the 
import  was  allowed  to  go  on  unrestricted,  and,  as  soon  as  circum- 
stances permitted,  Congress  amended  the  tariff  by  equalizing  the 
duties  on  all  forms  of  lead,  and  at  the  same  time  satisfied  the 
white-lead  manufacturing  interest  by  fully  protecting  their  prod- 
ucts from  foreign  competition. 

As  this  curious  story  has  been  heretofore  told,  the  importation 
of  the  leaden  statuary  has  been  popularly  attributed  to  the  agency 
of  the  former  well-known  New  York  firm  of  Phelps,  Dodge,  &  Co. 
This  is,  however,  an  error.  The  firm  of  Phelps,  Dodge,  &  Co.  was 
not,  at  the  time  of  the  occurrence  of  these  events,  in  existence  ;  and 
the  old  firm  that  preceded  them — namely,  that  of  Phelps  &  Peck, 
— although  large  importers  of  metals,  were  not  concerned  in  this 
matter  of  the  leaden  images. 

It  would  be  a  mistake,  furthermore,  to  infer  that  like  muddles 
and  perplexities  cease  to  characterize  the  tariff  when  Congress, 
taught  by  experience,  successively  remedied  the  omissions  and 
commissions  of  the  act  of  1828.  On  the  contrary,  there  has  been 
hardly  a  tariff  enacted  since  that  urne  which  has  not  the  absurdi- 
ties of  the  old  lead,  the  musket  balls,  the  clock  weights,  the  deep- 
sea  leads,  and  the  leaden  images  in  some  form  repeated.  Thus, 
for  example,  in  the  tariff  of  1846  a  duty  was  imposed  on  flaxseed 
of  twenty  per  cent.,  but  in  the  tariff  of  1857  linseed  was  made 
free,  while  flaxseed  was  charged  fifteen  per  cent.  duty.  As  might 
have  been  expected,  the  import  of  linseed  was  always  large,  but 
that  of  flaxseed  very  small. 

When  the  manufacture  of  cloth-covered  buttons  began  to  be 
established  in  New  England,  one  great  obstacle  in  the  way  of 
producing  an  article  sufficiently  cheap  and  sufficiently  nice  to 
attract  and  build  up  a  domestic  demand,  which  had  hitherto  been 
mainly  supplied  by  imported  buttons  of  wood,  metal,  or  bone, 
was  the  difficulty  of  obtaining  at  reasonable  cost  the  essential 


32  PRACTICAL  ECONOMICS. 

varieties  of  cloth  ;  the  fabrics  of  wool  and  silk  most  suitable  for 
covering  "  button-moulds,"  or  frames,  being  almost  exclusively  of 
foreign  manufacture,  and  subject  on  importation  to  such  extreme 
rates  of  duty  as  to  make  their  use  exceedingly  costly.  Rags, 
however,  could  be  imported  free  of  duty;  and  the  shrewd  Yankee 
manufacturer  took  advantage  of  the  situation  by  having  his 
foreign-made  "button  cloths"  technically  reduced  to  rags,  by 
cutting  them  up  into  small  pieces,  or  by  systematically  perforating 
the  goods  in  the  piece  with  holes  previous  to  importation,  a  pro- 
cess which  did  not  impair  the  value  of  the  cloth  for  use  as  button- 
covers,  and  really  only  anticipated  one  step  in  the  process  of 
manufacturing.  It  is  hardly  necessary  to  say  that  the  profits  on 
the  device,  so  long  as  it  was  not  interfered  with  by  the  officials, 
were  extraordinarily  large,  and  constituted  the  foundation  of  a 
large  fortune;  which,  in  part  at  least,  was  subsequently  devoted 
to  the  education  of  missionaries  for  the  work  of  Christianizing 
the  heathen  of  other  countries. 

Again,  in  1864,  the  manufacturers  of  spool  thread,  anxious  to 
shield  themselves  against  all  foreign  competition,  obtained  a  pro- 
hibitory duty  on  the  import  of  unwound  cotton  thread  or  yarn. 
When  the  law  went  into  effect  it  was  found  that  the  result  of  the 
new  duty  would  be  the  destruction  of  the  manufacture  of  fine 
elastic  fabrics,  suspenders,  gaiters,  etc.,  as  well  as  of  certain 
worsted  fabrics,  which  were  dependent  on  Europe  for  certain 
qualities  of  warp  yarns  not  then  manufactured  on  this  side  of  the 
Atlantic.  The  difficulty  was,  however,  got  over  by  an  absurd 
Treasury  ruling,  that  cotton  warp  or  yarn  intended  for  use  in  the 
manufacture  of  elastic  worsted  or  woollen  fabrics  was  not  un- 
wound thread  Or  yarn,  but  a  manufacture  of  cotton  u  not  other- 
wise provided  for." 

And,  coming  down  still  later,  Congress,  in  1872,  enacted  a 
general  reduction  of  ten  per  cent,  in  tariff  rates  on  metals  and 
manufactures  of  metals — watches  and  jewelry  excepted.  It  was 
clear,  however,  that  "  watch  cases "  are  not  "  watches,"  and 
neither  are  springs,  escapements,  wheels,  etc.,  etc.,  considered 
separately.  The  course  of  trade,  therefore,  in  respect  to  imported 
watches,  soon  adjusted  itself  as  follows  :  The  movements  taken 
out  of  the  cases,  packed  in  separate  cartons,  but  carefully  num- 
bered, were,  when  thus  imported,  clearly  manufactures  of  metals, 


THE    TRUE  STORY  OF   THE  LEADEN  STATUARY.  33 

and  as  such  entitled  to  the  rebate  of  ten  per  cent.  In  like  manner 
the  cases,  without  the  essentials  of  a  watch  in  them,  were  also 
held  to  be  nothing  but  manufactures  of  metal  (gold  and  silver), 
and  so  treated  in  respect  of  duty.  Watches,  of  course,  when  they 
come  in  as  watches,  pay  full  duty  ! ! ! 

Thus  the  old,  old  story  of  the  effect  of  impolitic  and  absurd 
restrictions  on  trade  and  commerce,  the  lesson  of  which  Europe 
through  centuries  of  experience  learned  and  profited  by,  con- 
tinues to  repeat  itself  in  the  fiscal  policy  of  the  United  States. 
Let  us  hope  that  the  result  here,  too,  at  no  distant  day  will  be 
what  it  has  been  elsewhere — namely,  to  force  men  to  the  conclu- 
sion that  the  best  system  of  taxation  is  to  tax  but  a  few  things, 
and  then  leave  those  taxes  to  diffuse,  and  adjust,  and  apportion 
themselves  by  the  inflexible  laws  of  trade  and  political  economy 
— and,  furthermore,  to  recognize  that  no  system  of  government 
has  any  just  claim  to  the  title  of  free,  which  arbitrarily  takes  from 
its  citizens  any  portion  of  their  property  for  any  purpose  other 
than  to  defray  the  necessary  expenditures  of  the  State. 


THE  SILVER  QUESTION. 


THE  DOLLAR  OF  THE  FATHERS  versus  THE  DOLLAR  OF  THE  SONS. 

The  substance  of  this  essay  appeared  originally  in  the  columns  of  the  Cincinnati 
Commercial,  July  2,  1877,  in  the  form  of  a  letter  addressed  to  the  editor,  Murat  Hal- 
stead,  Esq.  The  motive  that  mainly  prompted  its  writing,  was  a  desire  to  set  forth 
the  inconsistency  and  absurdity  of  the  attempt  to  win  popular  support  for  unlimited 
silver  coinage,  and  its  enforced  circulation  as  currency  through  the  invention  and  use  of 
the  term  "  The  Dollar  of  the  Fathers ,"  and  inferentially  claiming  thereby,  that  because 
in  the  old  days  of  low  prices  and  limited  cash  transactions  the  cumbersome  and  bulky 
silver  dollar  had  suited  the  requirements  of  the  fathers,  it  should,  therefore,  be  venera- 
ted and  used  by  their  sons,  notwithstanding  the  changes  in  the  methods  and  mechanism 
of  business,  consequent  on  a  higher  civilization,  clearly  demanded  something  radi- 
cally different  and  better.  A  continued  demand  for  the  essay  in  a  more  permanent 
and  readable  shape,  and  the  continued  interest  on  the  part  of  the  public  in  Europe  as 
well  as  in  the  United  States,  in  the  question  of  the  future  use  of  silver  as  a  material  for 
coinage,  subsequently  induced  its  republication,  with  additions,  in  a  pamphlet  form  ; 
but  the  edition  of  this  last  soon  passed  out  of  print. 

WHY    THE    CHINESE    DO    NOT    COIN    THE    PRECIOUS    METALS. 

IN  China  the  Government  long  ago  ceased  to  coin  the  pre- 
cious metals  or  regulate  "  the  value  thereof."  Gold  in  China 
is  not  money.  Silver  is  money  ;  but  neither  are  coined.  Both  are 
merchandise,  and  pass  by  weight  and  fineness.  But  although  the 
Chinese  Government  has  abandoned  the  coinage  and  regulation 
of  the  value  of  the  precious  metals,  it  has  not  absolutely  and 
entirely  abandoned  all  coinage. 

It  provides  one  coin,  and  one  only,  for  the  use  of  its  people, 
namely,  an  ugly,  coarse,  and  comparatively  heavy  disk,  composed 
mainly  of  iron,  with  a  little  copper;  cast,  and  not  stamped,  and 
bearing  some  rude  characters,  letters,  or  signs  upon  its  surfaces. 
This  coin,  which  is  known  among  foreigners  by  the  name  of  cash, 
has  a  value  of  about  one  mill,  American  money,  and  is  made  with 

34 


THE  SILVER   QUESTION,  35 

a  hole  in  the  centre  for  convenience  of  stringing  in  tens  and  its 
decimal  multiples.  It  occasionally  drifts  into  the  regions  of 
Western  civilization,  and  doubtless  often  suggests  the  inquiry, 
"  How  can  any  people  use  a  coin  so  heavy  and  of  such  trifling 
value  to  any  advantage  in  making  their  exchanges?"  The 
answer  is  a  very  simple  one.  The  wages  of  manual  labor  in 
China  do  not  in  general  exceed  fifteen  or  twenty  cents  per  day 
(our  money) ;  and  these  wages  serve  for  the  support  and  tolerable 
comfort  of  the  great  mass  of  the  people,  because,  in  part  by  reason 
of  the  great  stability  of  values,  but  mainly  because  of  the  fact 
that  labor  itself  is  the  real  standard  of  value,  to  which  the  prices 
of  all  the  products  of  labor  adjust  themselves ;  so  that  in  China, 
upon  apparently  small  wages,  a  man  may  live  as  well  as  in  other 
countries  upon  nominally  larger  wages.  But  whatever  may  be 
the  wages  of  a  day  in  any  country,  they  must  be  capable  of 
division  into  many  parts,  in  order  to  be  exchanged  for  the  many 
necessities  of  an  individual  or  a  family.  In  most  countries  this 
division  is  effected  by  the  use  of  coined  (metallic)  money. 
But  with  wages  at  twenty  cents  per  day,  the  use  of  coined  gold 
would  obviously  be  impracticable.  The  equivalent  of  a  day's 
labor  in  gold  would  be  too  small  to  be  handled  conveniently ;  the 
equivalent  of  an  hour's  labor  in  gold  would  be  no  bigger  than  a 
pin's  head.  And  in  a  smaller  degree  would  be  also  the  incon- 
venience of  using  coined  silver  for  effecting  the  division  of  wages 
ruling  at  the  rate  of  15  to  20  cents  per  day.  A  quarter  day's 
wages  would  be  represented  by  a  silver  coin  not  so  large  as  our 
5-cent  piece  ;  and  an  hour's  wages,  which  in  turn  might  buy  a 
pound  of  rice,  and  perchance  a  chopstick  to  eat  it  with,  by  a  piece 
of  silver  no  larger  in  circumference  than  the  flat  surface  of  a  small 
split  pea.  Therefore  the  Chinese  intelligently  discard  the  use  of 
coined  gold  and  silver,  and  in  their  place  have  substituted  the 
bulky  and  cheap,  but  at  the  same  time  admirable,  because  well 
adapted  and  useful,  cash,  which  sustains  the  same  relations  to  their 
low  nominal  wages  and  prices  that  gold  and  silver  coin  sustains  to 
the  nominally  high  wages  and  prices  of  other  countries ;  200 
pieces  of  cash  dividing  a  day's  wages  of  20  cents  into  200  equal  parts 
for  convenience  in  exchange  for  commodities  and  for  the  pay- 
ment of  taxes,  estimated  by  a  correspondingly  low  standard. 
Now  all  this  comprises  a  lesson  of  experience,  which  those  in- 


36  PRACTICAL  ECONOMICS. 

terested  in  the  question  to  what  extent  can  or  shall  silver  be  made 
the  circulating  medium,  and  an  instrumentality  of  exchange  in 
the  United  States,  may  do  well  to  consider.  That  it  is  possible 
also  to  debase  and  over-issue  a  currency  or  circulating  media 
of  as  low  a  type  and  of  as  small  absolute  value  as  the  Chinese 
"cash,"  and  that  the  resulting  consequences  of  such  "debase- 
ment "  and  "over-issue  "  will  be  precisely  the  same  in  character 
and  influence,  as  when  entailed  upon  a  currency  representing 
larger  specific  exchanges  and  greater  specific  values,  is  shown  by 
the  following  curious  story  of  Chinese  experience,  which  has 
been  told  to  the  writer  by  an  American  merchant,  resident  in 
China  at  the  time  of  its  occurrence,  and  who  was  not  only  per- 
sonally cognizant  of  the  facts  but  also  an  eye-witness  of  some  of 
the  involved  transactions. 

Shortly  after  the  termination  of  the  first  Anglo-Chinese  war 
(1838),  the  authorities  of  Pekin  delegated  the  government  of  the 
great  city  of  Foo  Chow — one  of  the  five  commercial  ports — to  a 
mandarin  of  great  reputation  and  learning,  who,  though  invested 
with  despotic  power,  governed  on  the  whole  so  well  that  the 
people  regarded  him  in  the  light  of  a  father,  and  in  his  visits  to 
the  city,  from  his  official  residence  outside  the  walls,  were  accus- 
tomed to  receive  him  with  the  utmost  respect  and  deference — 
standing  in  front  of  their  houses,  arrayed  in  their  best  garments, 
making  low  obeisances  as  he  passed,  and  crowning  him  and  his 
retinue  with  garlands  of  flowers.  But,  after  a  time,  the  love  of 
gain  taking  possession  of  the  ruler,  he  sought  to  gratify  it  by 
secretly  withdrawing  the  "  cash  "  in  current  circulation,  having  a 
market  value  as  metal  of  about  a  tenth  of  a  cent,  and  re-issuing 
the  same  in  larger  quantity  and  of  lighter  weight,  and  placing  the 
difference  in  value  in  his  pocket  as  private  property.  The  first 
thing  the  shop-keepers,  the  market-men,  and  the  laborers  knew 
about  it  was,  that  they  all  at  once  found  themselves  rather  abun- 
dantly supplied  with  "  cash  "  currency.  The  abundance  did  not, 
however,  at  first  disturb  them,  because  legitimate  Chinese  cash, 
like  all  other  true  money,  flows  where  it  is  most  wanted,  and  so 
finds  its  level.  But  in  this  case,  the  quality  being  inferior,  the 
natural  and  legitimate  "  flow  "  was  checked,  the  "cash"  accumu- 
lated, and  its  value  rapidly  declined,  so  that  at  first  12,  then  14,  15, 
and,  finally,  16  cash  were  required  to  purchase  what  formerly  could 


THE  SILVER  QUESTION.  37 

have  been  obtained  for  10, — in  the  same  way  as  the  purchasing 
power  of  our  "  greenbacks  "  declined  during  the  war  in  proportion 
to  the  abundance  of  their  issue. 

The  people  saw  this,  knew  the  cause  of  the  depreciation  and 
who  was  responsible,  and  proceeded  to  execute  justice  after  the 
Chinese  fashion  ;  for,  when  on  a  certain  day  the  mandarin  visited 
the  city,  as  by  previous  notice,  the  people  in  unusual  numbers 
turned  out  to  meet  him  ;  but  not  this  time  with  flowers  and 
obeisance,  but  with  strings  of  the  debased  money,  which  they 
threw  at  him  and  his  retinue  ;  and  also  so  beat  them  with  it,  that 
while  some  were  killed,  the  ruler  barely  escaped  with  his  life. 
Returning,  however,  to  his  palace  without  the  city,  he  imme- 
diately despatched  a  courier  to  Pekin,  informing  the  Government 
that  an  insurrection  had  broken  out,  and  demanding  troops  to 
seize  and  punish  the  offenders.  But  the  Government  was  not 
much  alarmed  ;  it  is  used  to  this  method  of  impeachment  by  the 
people,  it  knew  there  was  something  wrong,  made  no  haste  to 
send  force,  but  decided  to  wait  for  further  information  ;  and  in 
about  three  weeks  the  people's  courier,  travelling  by  slower 
methods,  arrived  and  communicated  the  other  side  of  the  story. 
Thereupon  an  investigation  was  made,  and  the  statement  of  the 
people  having  been  found  correct,  the  mandarin  was  deposed  and 
ordered  to  Pekin,  where  he  was  publicly  informed  that,  having 
sinned  in  the  highest  degree,  inasmuch  as  he  had  abused  his 
official  power  and  trust  to  wrong  and  defraud  the  people,  there 
was  no  longer  any  fit  place  for  him  among  the  living  ;  but  that, 
in  recognition  of  his  former  services,  he  would  be  permitted  to 
effect  his  own  departure  rather  than  put  the  state  to  any  trouble 
— an  intimation  which,  there  is  every  reason  to  believe,  was 
speedily  complied  with. 

PRICES,    WAGES,    AND    CUSTOMS   IN    1 792. 

In  1792  (when  the  dollar  of  the  fathers  was  first  established), 
the  average  price  of  the  ordinary  labor  of  adult  males  was  not  in 
excess  of  40  and  45  cents  per  day.  [The  pay  of  soldiers  in  the 
army  was  $4  per  month,  and  one  ration  per  day  of  the  value  of  12 
cents.  The  military  storekeeper  at  Springfield,  Mass.,  received 
$40  per  month  ;  artificers  and  armorers  at  posts  on  the  frontier, 
$5  per  month  ;  United  States  District  Judges,  $1,000  per  annum  ; 


38  PRACTICAL  ECONOMICS. 

messengers  in  the  Government  offices,  $150  per  annum.]  The 
prices  of  all  commodities,  conforming  then  as  now  to  the  prices  of 
labor,  were  also  correspondingly  small,  while  cash  transactions 
were  exceedingly  limited.  The  fathers,  moreover,  were  a  stay-at- 
home  people,  and  made  but  few  journeys,  or  journeys  of  any  con- 
siderable distance.  Under  such  circumstances,  the  gravity  of 
silver  was  a  matter  of  very  little  consequence,  and  a  bulky,  cum- 
bersome coinage  (the  dollar  of  the  fathers)  was  not  then  an  incon- 
venient instrumentality  for  making  exchanges,  and  for  the  same 
reason  that  the  heavy  cheap  Chinese  cash  is  not  an  inconvenient 
instrumentality  for  making  the  present  retail  Chinese  exchanges. 
The  present  conditions  of  affairs,  comparing  1885  with  1790,  or 
with  even  1840,  a  period  of  fifty  years  later,  is,  however,  entirely 
different.  The  prices  of  labor  and  of  its  products  have  greatly 
advanced.  [The  pay  of  soldiers  in  the  army  is  $13  per  month, 
and  one  ration.  The  military  storekeeper  at  Springfied,  Mass.,  re- 
ceives $200  per  month;  armorers,  from  $1.75  to  $3.50  per  day; 
United  States  District  Judges,  $4,000  per  annum  ;  messengers  in 
Government  offices,  $750  to  $1,000  per  annum.]  Now  everybody 
travels.  Comparatively,  and  probably  absolutely,  more  people  go 
every  year  from  the  Atlantic  to  the  Pacific,  and  vice  versa,  than 
fifty  years  ago  went  from  State  to  State.  Negroes  now  travel  in 
the  Southern  country  ten  times  as  much  probably  as  did  all  the 
people  in  that  section  before  the  Revolution.  Now  cash  transac- 
tions are  numerous  and  often  very  extensive.  Everybody  carries 
more  or  less  money  in  his  pocket,  and  it  is  far  from  unusual  for  in- 
dividuals to  carry  habitually  as  much  as  $100  on  their  persons. 
No  one  would  think  of  starting  upon  any  considerable  journey 
with  any  less  sum  of  money  at  his  immediate  command.  Under 
such  circumstances  the  weight  or  "tonnage  "  of  silver  becomes  an 
element  the  importance  of  which  has  thus  far  been  overlooked  in 
considering  the  extent  to  which  this  metal  can  in  future  be  used 
as  currency. 

THE    WEIGHT    OF    SILVER. 

Eighteen  dollars  and  fourteen  cents,  represented  by  the  pres- 
ent subsidiary  silver  coinage  of  the  United  States,  weigh  a  pound  ; 
one  hundred  dollars  weigh  five  and  a  half  pounds,  and  for  every 
thousand  dollars  that  a  man  is  paid  in  silver,  a  wheelbarrow  would 
become  necessary  if  he  proposed  to  remove  it.    The  wheelbarrow, 


THE   SILVER  QUESTION. 


39 


in  fact,  will  become  the  essential,  and  possibly  the  fashionable, 
portemonnaie  for  all  who  propose  to  engage  in  any  considerable 
moneyed  transactions,  if  the  dollar  of  the  fathers  is  to  be  made  by 
law  the  principal  circulating  medium.  If  a  business  was  extensive, 
and  it  became  desirable  to  pay  at  once  $300,000  (in  the  dollar  of 
the  fathers),  then  the  wheelbarrow  would  have  to  be  discarded, 
and  the  railroad  car  called  into  requisition.1  And  if  silver  is  to 
be  made  the  basis  of  banking  it  is  well  to  consider  that  there  is 
not  probably  a  bank  vault  in  the  country  that  can  hold  and  sus- 
tain a  single- million  of  coined  silver  weighing  more  than  twenty- 
five  tons.  If  silver  is  to  become  our  practical  single  standard,' a 
new  style  of  bank  architecture  must  be  adopted. 


RELATION    OF    NATURAL    LAWS    AND     NATIONAL     NECESSITIES    TO    THE 

SILVER    DOLLAR. 

While  silver,  therefore,  is  not  an  inconvenient  coin  in  coun- 
tries of  low  prices  and  limited  internal  exchanges,  and  however  it 
may  once  have  favorably  answered  to  conditions  in  the  United 
States,  our  present  condition  of  affairs — our  high  nominal  wages 
and  prices,  and  the  necessity  that  exists  for  the  carrying  of  com- 
paratively large  sums  of  money  upon  the  person — would  obviously 
seem  to  preclude  the  possibility  of  its  use  for  the  bulk  of  even  the 
retail  business  of  the  country.  And  if  by  law  silver  should  now 
be  made  the  exclusive  standard  for  money  values  in  the  United 
States,  no  law  could  enforce  its  use  for  general  circulation.  Sub- 
stitutes of  paper  money  would  be  resorted  to  and  speedily  re- 
place it. 

Again,  if  it  is  proposed  to  do  business  with  all  the  world  on 
terms  of  equality — and  the  great  trouble  with  us  as  a  nation  to- 

1  The  following  table,  prepared  for  the  writer  by  Mr.  E.  B.  Elliott  of  the  United 
States  Treasury  Department,  represents  the  weights  in  pounds  avoirdupois  of  various 
sums  of  United  States  Silver  coinage  : 

Number  Weight  in  pounds, 

of  dollat  s.  avoirdupois. 


1UU 

•     • 

5-5* 

1,000 

. 

55-12 

10,000 

.     . 

55I.I6 

30,000 

.    . 

.    1,653.47 

50,000 

. 

.    2,755.78 

100,000 

. 

.    5,511-55 

300,000 

. 

.   16,534.66 

40  PRACTICAL  ECONOMICS. 

day  is,  that  by  reason  of  various  circumstances  we  are  not  so  able, 
and,  therefore,  cannot  dispose  of  the  excess  of  our  commodities — 
we  must  make  use  of  those  instrumentalities  of  trade  of  every 
kind  (ships,  engines,  railways,  and  more  especially  the  money) 
which  the  commercial  world  has  adopted.  Now  the  money  of 
the  commercial  world,  of  all  international  trade,  is  mainly  gold  ; 
and  the  United  States  has  little  commerce  with  any  country 
which  uses  a  silver  standard.  To  some  this  may  appear  as 
a  matter  of  very  little  importance  ;  but  this  opinion  will  not  long 
be  entertained  if  it  is  remembered  that  so  sharp  is  the  competi- 
tion of  various  countries  for  trade,  and  so  completely  have  the 
barriers  of  space  and  time  been  broken  down  by  the  steamship, 
the  railroad,  and  the  telegraph,  that  the  question  as  to  who  shall 
take  the  lead  in  supplying  the  world  with  certain  great  commodi- 
ties is  going  to  turn  in  the  future,  not  on  cents,  but  on  fractions  of 
cents,  per  yard,  pound,  or  bushel ;  and  that  the  opportunity  for 
employment  and  for  the  earning  of  a  comfortable  livelihood  may  be 
denied  to  thousands  by  the  apparently  trifling  fluctuations  in  the 
purchasing  power  or  the  inconvenience  of  the  money  which  the 
country  may  use  in  making  its  exchanges. 

And  if  the  American  laborer — if  the  masses  of  our  people 
now  seeking  employment,  and  painfully  realizing  that  in  the 
midst  of  abundance  the  nation  cannot  market  its  abundance,  and 
because  it  cannot  market  it,  production  stops  and  poverty  in- 
creases— could  also  realize  how  much  of  all  this  trouble  is  con- 
nected with  the  attempt  to  make  the  United  States  adopt  and 
use  forms  of  money,  or  media  of  exchange,  which  our  own  experi- 
ence and  the  experience  of  other  nations  teaches  we  should  not 
use,  the  advocacy  of  any  thing  but  most  stable,  non-fluctuating, 
and  commercially  valuable  currency  would  be  any  thing  but 
popular. 

As  a  condition  of  national  defence,  furthermore, — to  enable 
the  nation  to  carry  on  a  future  war,  foreign  or  domestic,  offensive 
or  defensive — a  full  supply  of  the  most  valuable  coin  that  is  pur- 
chasable and  salable  without  discount  in  other  countries  (and  so 
available  for  settling  international  balances)  is  more  necessary 
than  a  full  supply  of  arms,  ships,  or  forts.  And  the  safest  de- 
positories of  such  coin  are  not  the  vaults  of  banks  or  of  the  Federal 
Treasury,  but  the  pockets  of  the  people ;  and  the  conveniences  of  the 


THE  SILVER  QUESTION.  4 1 

people  would  prompt  them  to  employ  more  coin,  and  so  keep  up 
a  greater  supply  of  the  essential  munition  of  war,  if  gold  was  the 
standard,  than  if  the  standard  was  exclusively  a  commodity  so 
cumbersome  as  silver. 

But  the  remonetization  of  silver,  or  the  proposed  restoration 
of  the  "  dollar  of  the  fathers,"  if  silver  continues  depreciated, 
would  be  equivalent  to  abolishing  the  use  of  coin  to  any  large 
extent  as#  circulating  medium  ;  or,  in  other  words,  natural  laws 
have  ordained  that  the  use  of  silver,  in  any  highly  prosperous 
commercial  community,  shall  be  limited  to  its  use  as  a  subsidiary 
token  coinage  ;  while  sound  policy  and  the  dictates  of  national 
interest  require  that  it  shall  not  be  made  legal  tender  except  as  a 
token  of  currency  for  small  amounts. 

REMONETIZATION  OF  SILVER  A  QUESTION  OF  NATIONAL  CONVENIENCE. 

Remonetization  of  silver  is,  therefore,  a  question  of  conven- 
ience, of  tonnage,  of  gravity,  and  cost  of  transportation.  The 
kind  of  coin  a  country  should  have  and  use  must  depend  upon 
the  value  of  its  transactions,  the  prices  of  its  labor,  and  the 
rapidity  and  magnitude  of  its  exchanges.  Iron  was  not  ill 
adapted  to  Sparta  as  a  metal  for  coinage.  It  would  not,  how- 
ever, suit  Chicago ;  and  everybody  in  Chicago  and  elsewhere  who 
will  take  the  trouble  to  understand  why  it  would  not  suit, 
will  at  the  same  time  see  that  it  is  not  the  dollar  of  the  Spartan 
daddy  or  of  the  fathers  that  we  want,  but  the  dollar  of  the  Yankee 
sons  that  the  country  requires  ;  and  that  it  ultimately  must  and 
will  have,  if  it  proposes  to  prosper. 

THE  FALLACY  OF  A  CHEAP  CURRENCY. 

But  the  advocates  of  the  remonetization  and  extended  use  of 
silver  as  currency  plant  themselves  on  what  they  regard  as  a 
fundamental  axiomatic  principle — namely,  that  it  is  necessary 
and  desirable  to  have  a  cheap  currency.  But,  as  a  matter  of  fact, 
no  commodity  currency  (gold,  silver,  copper,  iron,  or  cabbage)  of 
one  kind  can  be  relatively  cheaper  than  one  of  another  kind. 
The  value  of  each  (if  not  a  token  currency,  and  minting  is  free) 
will  depend  upon  the  amount  of  labor  embodied  in  or  that  will 
be  required  to  purchase  it :  and  no  legislation  can  give  to  it  any 
other  value.     If  a  gold  dollar  cost  on  an  average  one  day's  labor, 


42  PRACTICAL  ECONOMICS. 

and  a  silver  dollar  nine  tenths  of  a  day's  labor,  a  dollar  and  ten 
cents  of  nominal  silver  will  sell  for  the  same  price  as  a  dollar  in 
gold.  Whatever  nominal  value,  therefore,  legislation  may  give 
to  gold  or  silver,  it  will  have  no  influence  on  the  price  of  any  com- 
modity in  the  open  (or  world's)  market.  Neither  gold  nor  silver 
can  be  made  fiat  money  as  to  future  transactions;  and  the  amount 
of  labor  expended  in  their  production  will  establish  their  final  and 
permanent  value.  If  this  value  should  fail  to  be  recognized  for 
a  time,  labor  will  go  into  other  channels,  and  the  production  of 
these  metals  will  cease  until  their  labor  value  is  again  recognized. 

NO  NATIONAL  ECONOMY  IN  RESTORING  THE  DOLLAR  OF  THE  FATHERS. 

As  these  truths  are,  however,  persistently  ignored  by  the 
majority  of  those  who  have  undertaken  to  agitate  for  a  renewed 
use  of  the  dollar  of  the  fathers,  and  as  the  force  of  the  argument 
against  the  use  of  silver  by  reason  of  its  cumbersomeness  may  be 
attempted  to  be  met  by  assuming  that  it  is  proposed  to  use  silver 
as  a  basis  for  the  issue  of  a  (paper)  circulating  medium,  and  not 
as  a  medium  directly,  it  is  desirable  to  still  further  elucidate  this 
subject  by  illustration. 

Thus,  if  it  requires  $500,000,000  to  supply  an  exclusively  gold 
currency  for  this  country,  and  silver  is  depreciated  ten  per  cent. 
in  comparison  with  gold,  it  will  require  $550,000,000  in  silver  to 
perform  the  same  work  ;  and  it  will  require  the  same  amount  of 
commodities  or  embodied  labor  to  buy  the  exclusively  gold  cur- 
rency that  it  will  to  buy  the  exclusively  silver  currency.  What- 
ever may  be  the  dollar  or  the  unit  of  coin  adopted  by  any  country, 
it  will  have  no  effect  on  future  transactions,  for  prices  will  adapt 
themselves  to  the  amount  of  labor  embodied  in  the  new  coin, 
whether  it  be  of  great  or  small  value,  nominal  or  real.  No  one 
will  be  deceived  by  a  mere  nominal  dollar.  If  it  represents  less 
embodied  labor  than  the  real  dollar,  it  will  depreciate  just  in  pro- 
portion to  the  difference  in  the  amount  of  labor  embodied  in  the 
real  and  in  nominal  coin,  and  prices  of  every  kind  will  advance  just  in 
proportion  to  the  depreciation  of  the  coin  unit  that  is  used.1     If  the 

1  The  volume  of  the  French  assignate  (the  irredeemable  paper  of  the  French  rev- 
olutionary period)  is  said  to  have  at  one  time  reached  the  extent  of  45,000,000,000 
francs,  or  $9,000,000,000  ;  and  the  prices  of  services  and  commodities  so  adjusted 
themselves  to  this  condition  of  fiscal  affairs,  that  6,000  livres  (about  i8£  cents  each) 
was  the  usual  fare  for  a  ride  in  an  ordinary  hackney  coach. 


THE  SILVER  QUESTION. 

gold  dollar  should  be  made  to  contain  double  the  amount  of  pure 
gold  contained  in  the  present  dollar,  prices,  measured  in  dollars, 
would  immediately  depreciate  one  half,  and  it  would  require  only 
a  mental  operation  to  reduce  the  prices  of  commodities  to  the 
new  standard.  On  the  other  hand,  if  a  depreciated  silver  dollar 
currency  should  be  adopted,  it  would  only  require  a  like  mental 
effort  on  the  part  of  the  seller  of  property  to  advance  his 
prices  in  proportion  to  the  depreciation  of  the  new  coin,  and  no 
one  would  be  deceived  in  either  case.  The  aggregate  nominal 
silver  circulation  would,  however,  be  increased  in  proportion  to 
the  comparative  depreciation  of  silver,  and  would  cost  in  exchange 
for  other  products  just  the  same  amount  as  an  aggregate  gold 
circulation  would  cost.  In  other  words,  an  exclusively  aggregate 
gold  currency  can  be  bought  as  cheaply  and  with  as  little  burden 
to  the  country  as  an  exclusively  aggregate  silver  currency,  for 
they  are  both  worth  what  they  embody  of  labor — no  more  or  any 
less  on  the  average. 

When  the  Connecticut  Yankees  counterfeited  the  wampum 
which  Peter  Stuyvesant  made  currency  in  New  Amsterdam,  it 
continued  to  depreciate  in  value  until  it  sold  at  a  price  which 
barely  remunerated  the  counterfeiters  for  its  manufacture  and 
counterfeiting  only  ceased  when  the  price,  or  exchangeable  value, 
was  reduced  below  the  cost  of  its  manufacture.  If  we  permitted 
counterfeit  notes  to  pass  as  legal  tender,  they  would  finally  come 
down  to  represent  the  mere  cost  of  the  material  of  which  they 
are  composed,  and  of  their  manufacture,  and  would  then  become 
a  commodity  currency. 

From  these  considerations,  therefore,  it  would  seem  clear  that 
there  is  nothing  to  be  gained  as  to  future  transactions  by  having 
the  coin  currency  of  the  country  composed  of  one  or  the  other  of 
the  two  metals — gold  or  silver, — except  so  far  as  one  may  have  an 
advantage  over  the  other  in  respect  to  convenience,  adaptation  to 
the  business  of  the  country — domestic  and  foreign, — portability, 
and  the  like ;  and  on  all  these  points  the  balance  of  advantage  for 
all  transactions  above  $20  (a  sum  weighing  more  than  a  pound  in 
silver)  is  largely  on  the  side  of  gold ;  as  will  be  evident  when  it  is 
remembered  that  it  requires  sixteen  times  more  time  to  count 
silver  in  any  considerable  quantity  than  it  does  to  count  a 
like  value  in  gold ;    sixteen  times  more  strength   to   handle   it ; 


44  PRACTICAL  ECONOMICS. 

sixteen  times  more  packages,  casks,  or  capacity  to  hold  it,  and 
sixteen  times  more  expense  to  transport  it.  In  other  words,  in 
this  saving  age,  to  use  silver  for  large  transactions,  in  the  place  of 
gold,  is  a  misapplication  and  waste  of  fifteen  sixteenths  of  a  given 
unit  of  effort,  time,  expense,  and  capacity,  when  one  sixteenth 
would  accomplish  the  same  result. 

SILVER     INCONVENIENT     BOTH     FOR     GENERAL     CIRCULATION     AND    FOR 

BANK    RESERVES. 

Whatever  coin  is  held  as  a  reserve,  or  basis  for  banking,  must 
at  times  be  counted  and  at  times  transported  from  bank  to  bank, 
from  city  to  city,  from  State  to  State,  and  from  nation  to  nation. 
Bank-notes  must  be  redeemed  somewhere  and  at  some  time,  and 
if  the  redeeming  coin  is  inconvenient  for  general  circulation  and 
inconvenient  to  handle,  count,  and  transport,  or  to  use  as  a  bank 
reserve,  its  value  as  a  redeeming  coin  will  be  diminished  to  the 
extent  of  all  these  inconveniences.  The  value  of  a  redeeming 
currency  consists  largely  in  its  adaptability  to  general  circulation ; 
but  if  the  currency  is  bulky  and  ponderous,  its  value  is  diminished, 
because  it  is  a  constant  menace  to  the  creditor,  who,  at  the  arbi- 
trary will  or  caprice  of  the  debtor,  can  be  compelled  to  bring  his 
wheelbarrow,  cart,  or  freight-car,  and  receive  the  cumbersome 
coin.  It  may  also  be  here  pertinently  asked,  If  silver  is  never  to 
be  counted,  handled,  weighed,  or  transported,  why  remove  it  from 
its  native  bed  in  the  mines  ? 

THE  RELATIVE  VALUE  OF  GOLD   AND   SILVER    DETERMINED    BY  NATURAL 
AND    NOT    ARTIFICIAL    LAWS. 

One  element  of  confusion  that  has  been  introduced  in  the 
recent  discussions  of  the  question  of  the  use  or  disuse  of  silver  as 
a  material  for  currency  has  been  the  proposition  soberly  put  forth, 
that  the  permanent  and  ultimate  value  of  whatever  is  used  as 
money  depends  on  legislation ;  or,  what  is  the  same  thing,  that 
the  value  of  a  commodity  can  be  established  by  law,  and  is  not 
necessarily  based  upon  the  amount  of  labor  employed  in  its  pro- 
duction. But  if  all  countries  should  demonetize  both  gold  and 
silver,  the  market  value  of  both  metals  must  ultimately,  by 
natural  laws,  be  the  same  as  now,  when  they  are  almost  univer- 
sally recognized  as  money.     Universal  demonetization  would  at 


THE  SILVER  QUESTION,  45 

first  produce  a  surplus  of  the  precious  metals  in  form  of  coin. 
Production  would  cease— that  is,  the  mines  would  be  closed — and 
the  coin  in  existence  would  finally  be  absorbed  in  the  arts  and  for 
ornaments.  Loss  and  abrasion  would,  however,  continue,  and  at 
length  new  demands  for  the  arts  would  arise,  which  could  only  be 
supplied  by  a  remuneration  for  labor  sufficient  to  induce  a  re- 
opening of  the  mines,  or  what  would  be  equal  to  the  remuneration 
obtained  by  following  other  employments.  When  railroads  re- 
placed stage-coaches,  there  was  in  some  sections  of  the  country 
for  a  period  a  surplus  of  coaches  and  horses.  But  natural  laws  in 
process  of  time  restored  the  equilibrium,  and  now  horses  and 
coaches  cannot  be  bought  at  any  less  prices,  or  even  as  cheap,  as 
at  the  period  when  the  displacement  occurred. 

Authorities  differ  as  to  the  cause  of  the  present  depreciation 
of  silver.  But  the  drift  of  opinion  with  political  economists,  and 
those  who  have  made  the  subject  a  study,  is  that  the  present  de- 
preciation is  not  permanent,  but  has  been  produced  mainly  by  the 
action  of  certain  of  the  governments  of  Europe  demonetizing  it, 
and  forcing  its  sale  as  a  commodity  upon  the  world's  market. 
From  1857  to  1873  (which  latter  year  was  the  time  when  the  Ger- 
man Government  announced  the  demonetization  of  silver),  the 
variations  in  the  market  price  of  bar-silver  in  the  London  market 
were  between  6oT\  and  6i^t-  pence  per  standard  ounce,  or,  in 
other  words,  during  the  whole  of  this  period  the  silver  dollar  (of 
41 2 J-  grains)  of  the  United  States  was  worth  more  than  its  gold 
dollar  ;  and  for  a  period  of  six  years  (1 858-1 864)  it  exceeded  it  in 
value  by  over  four  per  cent.  Since  1873  the  decline  in  the  value 
of  silver  has  been  rapid  ;  the  fall  being  from  59^  pence  in  1873  to 
an  average  of  50.79  for  1883,  and  to  49^  in  April,  1885,  which  is 
equivalent  to  a  reduction  in  the  value  of  the  silver  dollar  in  com- 
parison with  gold,  from  100.45  in  1873  to  85.57  m  April,  1885. 
At  present  the  annual  production  of  silver  is  somewhat  in  excess 
of  the  annual  product  of  gold  ;  the  value  of  the  world's  production 
of  the  two  metals  (stated  in  dollars)  for  the  year  1883,  according 
to  the  estimate  of  Mr.  Burchard,  the  Director  of  the  Mint  of  the 
United  States,  having  been  $94,027,901  of  gold,  and  $114,217,733 
of  silver.  From  1877  to  1883  inclusive,  the  aggregate  world's 
production,  according  to  the  same  authority,  was,  however,  $743,- 
166,783  of  gold,  and  $678,884,932  of  silver. 


46  PRACTICAL  ECONOMICS. 

All  the  more  productive  silver  mines  are  now  producing  a 
large  percentage  of  gold  in  connection  with  silver ;  and  the  im- 
proved machinery  for  working  ores  of  silver  are  equally  applicable 
to  the  working  of  ores  containing  gold,  while  one  process,  largely 
profitable  for  the  working  of  gold — washing  under  hydraulic  pres- 
sure— is  not  at  all  applicable  to  the  working  of  silver.  Of  course 
it  is  not  possible  to  foretell  with  certainty  whether  silver  may  not 
be  hereafter  produced  more  abundantly  and  with  less  labor  than 
at  present,  or  formerly,  and  less  in  proportion  than  is  now  re- 
quired for  the  production  of  gold.  But  be  this  as  it  may,  the 
amount  of  labor  expended  in  producing  either  metal  in  the  future 
must,  as  in  the  past,  regulate  the  relative  value  of  each.  If  silver 
should  cease  to  be  a  legal  tender  throughout  the  world,  it  would 
still  continue  to  be  used  as  money,  until  a  substitute  in  the  form 
of  gold  could  be  obtained.  Silver-coin  is  a  non-perishable  article, 
and  the  amount  of  pure  silver  contained  in  such  coin  is  well  known. 
It  would,  therefore,  continue  to  be  used  at  the  convenience  of 
every  community — at  its  market  value  in  exchanges — until  an 
ample  supply  of  the  metal  made,  legal  tender  in  the  form  of  coin, 
was  obtained.  Stage-coaches  continue  to  be  used  after  the 
introduction  of  railroads  until  the  supply  and  service  of  rail- 
road cars  are  ample.  The  theory,  therefore,  that  the  demon- 
etization of  silver  will  produce  a  sudden  vacuum  of  metallic 
currency,  or  a  demand  for  gold,  more  than  sufficient  to  cause 
its  production  to  the  extent  required,  is  chimerical  and  without 
foundation. 

THE    GOLD   STANDARD    OF    THE   COMMERCIAL    WORLD    A    NECESSITY  FOR 

THIS   COUNTRY. 

As  already  pointed  out,  the  principal  cause  of  the  present  de- 
preciation of  silver  has  been  the  discarding  and  sale  of  its  silver 
currency  by  Germany ;  and  as  the  great  commercial  nations  of 
the  world  did  not  require  this  discarded  silver,  and  would  not 
purchase  it  for  any  purpose,  depreciation  has  been  the  inevitable 
temporary  result.  The  foreign  commerce  of  the  East  Indies,  to 
which  countries  this  surplus  of  silver  must  ultimately  be  ex- 
ported, is  limited  ;  and  these  sections  of  the  world,  however  much 
they  may  want  silver,  cannot  suddenly  receive  and  pay  for  large 
quantities  of  it.     They  must  pay  for  what  they  receive  with  their 


THE  SILVER  QUESTION.  47 

exports,  and  these  exports,  with  their  limited  foreign  commerce, 
cannot  be  suddenly  increased.  But  at  the  same  time  it  is  not 
improbable  that  the  East,  after  a  while,  will  absorb  all  the 
present  apparent  surplus  silver  of  the  West,  a  result  which  the 
recent  extension  of  the  Russian  dominion  over  Central  Asia  will 
undoubtedly  accelerate ;  for  it  is  admitted  that  one  result  of 
such  dominion  has  been  to  give  security  to  life  and  property 
to  large  sections  of  country  and  to  great  numbers  of  people 
where  such  conditions  did  not  formerly  exist,  and  these,  in 
turn,  must  result  in  great  extension  of  production  and  exchange, 
and  the  consequent  increased  demand  for  and  use  of  (silver) 
money. 

At  present  the  East  seems  to  require  annually  at  least  $50,- 
000,000  of  silver1  ;  for  the  years  1875-6,  the  exports  from  the 
West  to  the  East  exceeded  $75,000,000. 

If  now  the  United  States  should  ally  its  destiny  to  a  silver 
currency,  and  we  should  find  at  any  time  that  we  had  an  excess 
of  silver,  we  should  be  in  the  present  predicament  of  Germany — 
with  no  immediate  purchaser  or  reservoir  in  the  commercial 
world  with  which  we  have  intimate  relations  to  receive  it.9  We 
should  be  not  less  embarrassed  if  for  any  reason  we  needed 
suddenly  an  increased  amount  of  silver ;  for  then  we  should  be 
obliged  to  draw  it  back  through  the  same  narrow  and  distant 
channels,  requiring  both  time  and  expense. 

WHY    GIVE    TO    OTHER     NATIONS     AN     OPTION     TO     TAKE    OUR    GOLD    AT 
LESS    THAN    ITS   VALUE    IN    THE    WORLD'S   MARKET  ? 

Again,  for  the  United  States  to  now  abandon  the  single  and 
present  exclusively  gold  standard,  and  adopt  the  bi-metallic 
standard  (both  metals  being  made  legal  tender  in  the  form  of 
coin),  would  amount  to  practically  giving  to  all  the  world  the 
privilege  of  taking  all  our  gold  at  a  nominal  price  in  silver,  or  all 
our  silver  at  a  nominal  price  in  gold.  For  arbitrarily  fix  what 
relations  of  value  we  will   between  gold  and  silver,  there  will 

1  Mr.  J.  Hector,  Deputy  Secretary  of  the  Bank  of  Bengal,  has  recently  estimated 
that  British  India  absorbed  $820,000,000  of  silver  in  the  twenty  years  prior  to  June, 
1875,  in  excess  of  her  exports  of  that  metal. 

*  This  prediction,  made  when  this  essay  was  written  in  1877,  has  since  been  abund- 
antly verijied. 


48  PRACTICAL  ECONOMICS. 

always  be  a  liability  to  such  changes  in  these  relative  values  as  to 
create  an  opportunity  for  a  profit  by  interchanging  the  one  for 
the  other  in  the  form  of  coin,  the  value  of  which  has  been 
arbitrarily  established  (temporarily)  by  law.  Now,  what  object 
can  the  people  of  the  United  States  have  in  giving  to  the  rest 
of  the  world  such  an  option,  when  none  of  the  commercial 
countries  with  which  we  are  on  intimate  commercial  relations- 
propose  to  extend  to  us  any  such  privilege  ?  The  creating  of 
conditions  whereby  such  an  option  can  be  given  to  foreign 
countries  will  unquestionably  entail  upon  us  as  a  nation  great 
inconveniences  in  the  future,  as  it  has  in  the  past.  At  times  it 
may  siphon  out  of  the  country  so  much  of  our  entire  circulation 
as  may  be  silver  and  replace  it  by  gold ;  and  at  another  time  by 
the  change  of  temporary  market  values,  or  changes  in  the  legisla- 
tion of  other  countries,  the  gold  may  be  siphoned  out  and  the 
silver  return.  Any  sudden  influx  of  foreign  coin — gold  or  silver 
— would  not,  however,  be  readily  and  at  once  practically  available, 
as  the  people  would  not  at  once  willingly  receive  and  admit  the 
coins  of  foreign  nations  into  general  circulation.  But  as  the 
capacity  of  our  mints  will  be  inadequate  to  meet  these  extraordi- 
nary demands  that  may  arise,  the  necessities  of  the  people  may 
compel  them  to  receive  foreign  coins  for  a  time,  whose  value  they 
are  incapable  of  suddenly  appreciating ;  thereby  producing  end- 
less confusion  and  uncertainty,  as  was  the  case  previous  to  1853, 
when  the  country  was  flooded  with  old  Spanish  and  Mexican 
depreciated  coin,  and  when  silver  of  American  coinage  of  full 
legal  weight  flowed  out  of  the  country  as  fast  as  the  mints  could 
issue  it.  If  France  should  admit  free  coinage  and  unrestrained 
circulation  of  silver,  and  silver  continue  depreciated,  she  would 
have  to  immediately  mint  anew  not  less  than  $700,000,000  of 
silver,  which,  by  the  competition  of  bullion  brokers,  would  be 
sent  to  her  in  exchange  and  for  the  supplanting  of  the 
$700,000,000  of  gold  which  she  now  possesses.  This  vast  sum 
is  more  than  sufficient  for  all  the  available  silver  in  the  world  to 
cushion  upon,  if  France  should  again  adopt  unlimited  coinage  of 
silver,  and  maintain  her  standard  of  1 5  J-  to  I.  Nor  could  we 
under  such  circumstances  retain  in  this  country  a  single  dollar  of 
silver,  if  it  was  remonetized  here  according  to  the  standard  of  16 
to  I.     In  fact,  with  a  bi-metallic  standard  we  cannot  control  and 


THE   SILVER  QUESTION.  49 

say  what  kind  of  coin  wc  will  have  in  circulation  ;  for  other 
countries  can  at  their  will  draw  from  us  cither  all  our  silver  or  all 
our  gold,  and  substitute  the  one  metal  for  the  other.  Long 
before  we  nominally  demonetized  silver,  it  was  practically  de- 
monetized and  banished  from  our  territory.  The  recent  depre- 
ciation of  silver  is,  however,  due  to  the  recent  action  of  the 
German  Government ;  and  if  any  debtor  therefore,  has  now  a 
grievance  by  reason  of the  demo  nit  izat  ion  of  silver,  it  is  a  grievance 
against  the  German  Umpire  and  not  against  the  Government  of  the 
United  States.  Prudence,  therefore,  would  seem  to  dictate  that 
whether  debtors  have  or  have  not  a  grievance,  we  should  not 
again,  by  adopting  the  bi-metallic  standard,  permit  the  practical 
demonetization  or  monetization  of  either  silver  or  gold  in  this 
country  to  be  absolutely  under  the  control  of  other  governments. 
We  cannot  be  masters  of  the  situation  with  a  bi-metallic  standard. 
We  can  only  control  the  kind  of  coin  we  will  use  by  utterly 
refusing  to  give  the  option  which  the  bi-metallic  standard  implies, 
and  the  real  question  of  the  whole  controversy  is:  "  Shall  we  have 
the  coin  of  our  choice  or  the  coin  which  other  nations  may  select 
to  dole  out  to  us  as  their  caprice  or  interest  may  from  time  to 
time  dictate?" 

On  the  other  hand,  the  great  commercial  countries  with  which 
we  are  in  intimate  relations,  and  which  recognize  the  single  gold 
standard,  have  great  reservoirs  of  gold,  and  ability  through  their 
foreign  commerce  to  either  receive  our  surplus  gold  and  pay  for 
it,  or  send  us  their  surplus  gold  and  receive  our  products  in 
exchange.  These  great  reservoirs  of  gold,  furthermore,  immedi- 
ately respond  to  any  deficiencies  or  demands  for  gold  in  the 
various  commercial  countries  using  gold  as  a  standard,  and  so,  by 
the  law  of  supply  and  demand,  keep  the  volume  of  gold  in 
equilibrio  with  the  volume  of  commodities  to  be  measured,  and 
greatly  aid  in  maintaining,  in  respect  to  most  articles,  a  uni- 
formity of  prices.  It  would  seem  to  be  apparent,  therefore,  from 
these  considerations  alone,  that  for  this  country  to  now  reject  the 
coin  of  the  great  commercial  nations  as  a  standard  of  value,  and 
adopt  another  standard,  or  two  standards,  would  inevitably  entail 
upon  it  great  and  incalculable  loss  and  inconvenience,  and  power- 
fully contribute  to  arrest  our  future  industrial  and  commercial 
development. 


50  PRACTICAL  ECONOMICS. 

THE   DOLLAR   OF    THE    FATHERS   AND    THE   PAYMENT    OF   DEBTS. 

The  question  of  next  and  final  importance  to  be  considered  is: 
Is  it  desirable  to  provide  by  legislation  that  debts '  incurred  prior 
to  1873,  when  silver  was  demonetized,  may  be  paid  in  either  gold 
or  silver,  as  the  law  authorized  before  that  period  ?  If  silver  is  to 
be  permanently  and  largely  depreciated  relatively  to  gold,  in  con- 
sequence of  a  diminution  in  the  amount  of  labor  required  to  pro- 
duce silver,  this  is  a  practical  and  important  question  of  constitu- 
tional law  and  morals.  But  if  the  present  price  of  silver  is  owing 
to  temporary  influences,  and  if  within  a  few  years  it  is  likely  to 
resume  its  old  price  in  the  markets  of  the  world ;  or  if  the  adop- 
tion on  the  part  of  the  United  States  of  the  bi-metallic  standard 
will,  as  soon  as  our  mints  have  coined  all  the  silver  presented  for 
coinage,  restore  silver  to  par,  or  nearly  par,  with  gold,  the  question 
is  comparatively  unimportant.  For  the  debtor  cannot  show  that 
he  has  been  injured  unless  he  can  prove  that  silver,  as  merchan- 
dise, would  be  depreciated,  relatively  to  gold,  after  restoration  of 
the  bi-metallic  standard,  as  it  existed  at  the  time  his  debt  was 
contracted.  Let  us,  therefore,  examine  the  question  from  the 
standpoint  of  constitutional  law  and  morals. 

Debts  payable  in  coin  are  in  effect  payable  in  commodities. 
A  coined  dollar  before  1873  in  this  country  was  not  an  imaginary 
unit,  but  a  physical  actuality,  composed  of  412^  grains  of  silver,  or 
28.8  grains  of  gold.  In  all  commercial  transactions  common 
honesty  also  requires  that  the  dollar  shall  always  be  treated  as  a 
commodity — that  is,  that  its  name  shall  always  indicate  a  given 
fineness  and  weight  of  metal.  A  bushel  is  not  an  imaginary 
measure  of  capacity ;  a  yard  is  not  an  imaginary  measure  of 
length ;  a  pound  is  not  an  imaginary  measure  of  weight ;  and  a 
dollar  ought  not  to  be  regarded  as  in  any  sense  an  imaginary 
measure  of  value. 

Again,  debts  payable  in  coin  dollars  are  stipulated  rights  to 
specific  property,  and  in  both  law  and  morals  should  be  held 
equally  sacred  with  property  itself.  Any  interference  with  the 
rights  of  contracts  is  only  a  form  of  theft  or  robbery.  It  is  true 
that  there  has  never  been  any  national  law  requiring  that  coin 
contracts  shall  be  payable  in  gold  and  silver  coins  of  the  weight 
and  fineness  established    by  law  at  the  time  the  contracts   are 

1  Railroad  and  other  mortgage  bonds,  Government  and  State  securities,  and  the  like. 


THE  SILVER  QUESTION.  5  I 

made,  but  it  is  generally  recognized,  nevertheless,  as  a  moral  and 
constitutional  obligation  to  pay  in  the  same  number  of  grains  of 
pure  metal  as  the  law  required  when  a  given  contract  was  made. 
And  it  is  time  that  Congress  should  act  and  proclaim  that  this 
hereafter  must  be  the  known,  conceded,  and  recognized  rule. 
There  is  no  reason,  furthermore,  why  this  rule  should  not  be 
applicable  to  all  debts  contracted  when  silver  was  a  practical  legal 
tender,  even  if  silver  is  permanently  depreciated,  and  if  its  full 
remonetization  will  not  restore  it  to  par  with  gold. 

THE  ADOPTION  OF  THE  BI-METALLIC  OR  ALTERNATE  STANDARD  IS  A 
VIOLATION  OF  THE  NATURAL  LAW  OF  SUPPLY  AND  DEMAND, 
WHEN    ONE    COIN    IS   MORE    CONVENIENT    THAN    THE    OTHER. 

It  is  claimed  by  some  that  the  demonetization  of  silver,  and 
the  adoption  of  a  single  gold  standard,  will  so  far  appreciate  the 
price  and  value  of  gold,  as  to  greatly  increase  the  burden  of  ex- 
isting debts,  and  diminish  the  supply  of  useful  instrumentalities 
for  effecting  national  exchanges.  But  this,  although  a  specious, 
is  an  utterly  false  theory,  unsustained  by  either  facts  or  logic. 
Any  demand,  where  human  industry  is  left  free,  will  be  met  by  a 
corresponding  supply.  The  fact  that  there  may  be  at  a  given 
time  an  increased  demand  for  gold,  and  a  diminished  demand  for 
silver,  does  not  necessarily  indicate  or  prove,  that  the  cost  in 
labor  of  producing  gold  has  increased,  or  the  cost  of  producing 
silver  has  decreased.  It  simply  indicates  the  direction  that 
natural  laws  are  giving  to  production,  and  also  that  the  same 
laws  are  interposing  obstacles  in  the  way  of  producing  things 
inconvenient  or  useless.  It  is  undoubtedly  true  that  the  cost  of 
producing  both  gold  and  silver  is  much  less  than  formerly. 
Every  railroad  and  other  modern  improvement,  which  gives 
cheaper  clothing  and  food  to  miners,  as  well  as  all  labor-saving 
machinery  employed  in  mining,  enables  labor  to  produce  a  larger 
amount  of  gold  and  silver  in  a  given  time.  Hence  the  great 
depreciation  of  both  gold  and  silver  during  the  last  third  of  a 
century.  And  the  probabilities  are  that  this  depreciation  in  the 
value  of  this  precious  metal  will  further  continue ;  and  creditors 
must  submit  to  such  results.  Within  the  next  quarter  of  a 
century,  instead  of  one  railroad  crossing  our  continent  (as  in  1877), 
there  will  probably  be  half  a  dozen,  with  several  branches,  further 


52  PRACTICAL  ECONOMICS. 

developing  our  natural  reservoirs  of  gold  and  silver.  In  fact  the 
recent  abundant,  or,  what  is  the  same  thing,  cheap  production  of 
both  gold  and  silver,  is  the  sole  cause  which  has  necessitated  the 
partial  demonetization  of  silver — the  most  cumbersome  metal — 
by  countries  maintaining  a  high  scale  of  prices  of  wages  and 
commodities.  In  other  words,  it  is  the  abundance,  not  scarcity, 
of  the  precious  metals  that  has  given  rise  to  the  controversy  as 
to  what  metals  it  is  expedient  to  use  at  this  time  for  circulating 
media.  No  one  can  suppose  that  this  controversy  about  de- 
monetization of  silver  has  been  occasioned  by  any  abstract  desire 
for  discussion ;  it  has  been  forced  on  the  world  by  the  necessities 
of  the  situation.  There  is  a  natural  law  by  which  both  labor 
and  capital  tend  to  the  most  profitable  employments,  and 
if  there  is  a  temporary  increased  demand  for  gold  and  a  tem- 
porary diminished  demand  for  silver,  labor  and  capital  in  the 
production  of  gold  will  be  supplemented,  until  an  equilibrium  is 
established,  and  without  any  reference  to  the  permanent  cost 
of  the  production  of  either  metal.  Supply  and  demand  are  to 
production  what  waves  are  to  the  ocean ;  and  notwithstanding 
the  depressions  created  always  and  everywhere  by  these  waves,  all 
scientists  agree  that  the  general  and  average  level  of  the  ocean  is 
constant  and  unvarying.  It  is  by  the  natural  laws  of  supply  and 
demand  that  the  introduction  of  the  most  desirable  commodities 
is  always  stimulated,  and  the  production  of  surplus  and  unsuita- 
ble articles  is  checked  and  discouraged,  without  reference  to  their 
cost  of  production.  Thus  far  all  the  evidence  tends  to  show  that 
the  cost  of  producing  silver  relatively  to  gold  has  not  been 
apparently  diminished.  Now,  applying  these  principles  to  the 
problem  under  consideration,  it  follows  that  the  adoption  of  the 
bi-metallic,  or  alternate  standard  may,  for  a  period,  create  an  arti- 
ficial demand  for  a  coin  not  suited  to  the  wants  of  some  com- 
munities, the  result  of  which  may  be  the  indefinite  production  of 
an  article  not  well  suited  to  certain  human  wants.  Nature  has 
created  an  abundance  of  both  gold  and  silver.  If  man  refuses  to 
produce  the  metal  best  adapted  to  his  wants,  and  persists  in 
producing  another,  ill-adapted  to  his  wants,  by  an  artificial,  bi- 
metallic standard,  he  makes  warfare  upon  the  beneficence  of 
the  Almighty.  Therefore  the  conclusion : — that  the  adoption 
of  a  bi-metallic  standard   is  a  violation   of   the  natural   laws  of 


THE   SILVER   QUESTION.  53 

supply  and  demand,  and  an  attempt  to  provide  for  the  survival  of 
unfittest. 

Again,  the  gold-producing  power  of  the  earth  is  abundant  and 
unlimited,  and  the  supply  of  this  metal  will  be  no  more  limited  in 
the  future,  than  the  supply  of  milk  or  whiskey;  and  if  left  to 
natural  laws  will  always  be  equal  to  the  demand.  The  employ- 
ment of  coin  is  not  an  absolute  necessity,  for  commerce  can  be 
carried  on  by  barter.  But  food  and  clothing  arc  absolutely  neces- 
sary for  the  sustenance  of  human  beings.  And  yet  we  find  that 
these  absolutely  necessary  articles  are  best  supplied  when  their 
production  is  left  to  the  natural  laws  of  supply  and  demand. 
Value  is  the  relation  or  ratio  between  two  articles  or  services; 
and  there  is  no  more  propriety  in  establishing  a  relation  between 
silver  and  gold,  than  between  iron  and  lead,  or  rye  and  wheat ;  or 
between  silver  or  gold  and  brass,  copper,  and  all  other  commodi- 
ties. When  economic  laws  and  the  efficacy  and  value  of  indi- 
vidual judgment  were  less  understood  than  now,  governments 
were  logical,  and  established  prices,  or  the  relations  of  all  labor  or 
commodities  to  gold  and  silver.  But  now,  in  the  main,  prices  and 
production  are  left  to  individual  judgment  and  competition,  and 
an  arbitrary  regulation  of  the  relations  of  silver  to  gold  is  now  the 
sole  relic  of  governmental  interference  in  regulating  the  prices  of 
articles ;  or,  in  other  words,  in  establishing  the  relation  of  things 
as  expressed  in  money.  The  reason  why  gold  and  silver  are  the 
best  standards  of  value  is,  that  they  are  the  products  of  human 
labor,  and  that  their  production  will  always  be  regulated  by  de- 
mand. They  are,  therefore,  not  a  fiat  currency.  The  quantity 
produced  is  not  regulated  by  the  arbitrary  actions  of  any  govern- 
ment, but  is  determined  by  individual  judgment  and  the  natural 
influence  of  competition.  The  production  of  gold  in  the  United 
States  is  at  present  [1885]  about  thirty  millions  per  annum. 
There  is  no  reason  why  this  domestic  product  of  gold  should  not 
be  agumented  to  more  than  one  hundred  millions  per  annum,  if 
there  is  a  demand  for  it — and  all  there  is  wanting  to  produce  it, 
is  demand.  We  have  capital  and  abundance  of  labor  craving  em- 
ployment, and  gold-bearing  rocks  and  fields  without  limit.  Here 
is  an  unlimited  opportunity  for  debtor  or  creditor  who  wants  to 
"  root  "  or  labor  at  the  remuneration  afforded  by  the  prosecution  of 
other  similar  labor ;  and  it  is  not  proposed  to  compel  him  to  root 


54  PRACTICAL  ECONOMICS. 

or  labor  at  something  that  is  less  profitable.  Furthermore,  if  it  is 
gold  rather  than  silver  that  is  wanted  in  this  country,  every  pound 
of  our  silver  product,  as  well  as  our  other  commodities,  can  be 
used  to  buy  gold  in  the  markets  of  the  world :  and  thus  the  gold 
resources  of  the  world  are  at  our  command. 

THE    LAW    OF   SUPPLY    AND   DEMAND. 

A  brief  word  further  on  the  law  of  supply  and  demand  in 
respect  to  currency,  and  in  answer  to  the  frequent  assertion  that 
unless  the  Government  freely  coins  silver  and  assists  its  circula- 
tion, the  country  will  suffer  for  lack  of  sufficient  currency.  If 
there  was  a  real  or  anticipated  scarcity  of  wheelbarrows  in  the 
country  that  man  would  be  considered  a  fool  who  should  seriously 
propose  that  Congress  should  undertake  to  regulate  the  supply  by 
statute.  And  yet  there  is  one  and  the  same  law  governing  alike 
the  supply  of  gold  and  of  wheelbarrows.  They  are  both  tools  or 
commodities,  and  the  country  will  have  and  use  all  of  either  that 
it  can  use  profitably.  The  dentists  and  jewellers  of  the  United 
States  have  never,  even  at  the  time  when  gold  commanded  the 
highest  premium,  experienced  any  difficulty  in  getting  all  the  gold 
they  wanted.  We  have  never  heard  that  any  of  them  ever  con- 
templated petitioning  Congress  on  the  subject,  or  that  they  lay 
awake  nights  for  fear  that  their  business  would  be  interfered  with 
by  reason  of  a  deficiency.  And  if  they  had  wanted  ten  or  a 
hundred  times  more  gold  than  they  actually  used,  and  their  cus- 
tomers had  been  willing  to  pay  for  it,  they  could  easily  have  had 
it.  In  short,  there  can  never  be  a  permanent  scarcity  or  surplus 
of  gold  and  silver  in  a  country  which  adopts  the  world's  currency, 
any  more  than  there  can  be  a  scarcity  of  milk  or  wheat ;  for  the 
law  of  supply  and  demand  regulates  the  quantity  and  adjusts  the 
prices  of  one  of  these  commodities  just  as  much  as  it  does  the 
other.  If,  in  the  next  twenty-four  hours,  one  hundred  millions  of 
legal  tenders  were  to  be  added  to  the  circulation  of  the  United 
States,  domestic  prices,  other  things  remaining  equal,  would  on 
the  average  be  affected  to  the  extent  of  not  less  than  one  seventh, 
and  currency  would  remain  in  respect  to  scarcity  or  abundance 
relatively  as  before.  But  if  one  hundred  millions  of  gold,  with- 
out labor,  were  to  be  mysteriously  showered  down  upon  us  in  the 
form  of  coin,  it  would  not  affect  prices  appreciably,  for  the  disturb- 


THE  SILVER  QUESTION.  55 

ance  from  the  increased  quantity  would  be  diffused  over  the  total 
coin  circulation  of  the  world,  estimated  at  upward  of  ten  thousand 
millions.  The  world's  currency  may  therefore  be  compared  to  a 
reservoir  like  the  broad  ocean,  capable  alike  of  quietly  absorbing 
any  surplus  or  supplying  any  deficiency  in  the  circulation  of  any 
locality  without  disturbing  the  general  level  of  prices.  Any 
increase,  on  the  other  hand,  in  the  volume  of  currency  which 
owes  whatever  it  has  of  legal-tender  character  to  statute  enact- 
ment rather  than  to  a  universally  recognized  value,  must  be 
subject  to  local  rather  than  general  laws,  and,  lite  an  accumulation 
of  water  escaping  from  a  broken  reservoir,  will  prove  powerful  for 
disturbance  just  in  proportion  as  its  volume  becomes  dispropor- 
tionate to  the  channel  in  which  it  is  compelled  to  flow.  Hence 
the  extraordinary  gambling  fluctuations  which  of  necessity  attend 
the  use  of  any  currency  whose  circulation  is  local  and  does  not 
partake  of  the  universality  of  the  world's  currency ;  and  experi- 
ence must  inevitably  sooner  or  later  show  that  there  can  be  no 
permanent  prosperity  in  any  country  that  undertakes  to  do  busi- 
ness with  any  other  currency  than  the  world's  currency. 

THE  MASS  OF  THE  PEOPLE  NOT  DEBTORS  BUT  CREDITORS. 

It  is  also  pertinent  to  call  attention,  in  connection  with  this 
general  subject,  to  the  opinion  which  so  generally  prevails,  that 
the  mass  of  the  people  of  this  country  are  debtors,  and  that  their 
interest  naturally  arrays  them  in  opposition  to  any  policy  that 
does  not  favor  what  is  popularly  termed  M  cheap  money  " — the  real 
significance  of  which  to  the  majority  of  those  who  use  it  is  "  poor 
money."  Now,  so  far  from  this  hypothesis  being  warranted,  the 
exact  contrary  is  the  truth.  The  great  mass  of  the  people  in  this 
and  every  other  country  do  not  possess  sufficient  of  credit,  through 
the  ownership  of  property  or  amount  of  income,  to  enable  them 
to  become  debtors — however  much  they  may  desire  to  be — except 
for  such  insignificant  amounts  as  the  application  of  a  few  days' 
labor  or  the  practice  of  a  brief  economy  would  suffice  to  liquidate. 
The  great  mass  of  all  who  work  for  wages — from  the  fact  that 
the  wages  are  paid  periodically — are  also,  from  necessity,  nearly 
all  the  time  creditors  and  not  debtors;  while  in  the  case  of  that 
much  smaller  portion  of  our  population  whose  annual  receipts  ex- 
ceed their  annual  expenditures,  the  surplus  in  their  hands,  at  any 


$6  PRACTICAL  ECONOMICS. 

one  time,  for  investment  is  so  small  that  the  only  profitable  way 
open  to  them  for  using  it  is  by  assuming  the  position  of  creditor 
— i.  e.y  by  loaning  either  directly  on  a  promissory  note,  bond,  and 
mortgage,  or  by  the  purchase  of  some  evidence  of  indebtedness 
issued  by  the  Federal  or  State  governments  or  by  corporations, 
or  by  loaning  indirectly  as  stockholders  or  depositors  through 
banks  or  institutions  for  the  management  of  savings.  Hence  the 
origin  of  the  eleven  hundred  millions  of  dollars  standing  to  the 
credit  of  depositors  in  our  savings  banks.  Hence,  also,  the  even 
more  striking  fact  that  in  New  York  City,  where  the  multitude  of 
banks  is  popularly  supposed  to  be  due  to  the  accumulation  of 
large  wealth  in  few  hands,  the  average  amount  of  bank  stock 
owned  by  individual  shareholders  does  not  exceed  a  par  value  of 
$3,000.  The  only  class  of  debtors  whose  instincts,  therefore, 
naturally  prompt  them  to  cry  for  abundant  and  cheap  money,  irre- 
spective of  quality,  are  what  may  properly  be  termed  "  bloated 
debtors,"  or  those  who,  by  reason  of  large  property,  have  claimed 
and  obtained  large  credits,  and  have  used  those  credits,  or,  what 
is  the  same  thing,  have  run  in  debt  partially  on  account  of  legiti- 
mate enterprises,  but  in  the  majority  of  cases  for  the  furtherance 
of  illegitimate  speculations  whose  existence  and  maintenance 
have  worked  to  the  discouragement  of  honest  productive  industry. 

CONCLUSION. 

There  can  be  no  objection  to  the  use  of  silver  as  a  subsidiary 
or  token  currency,  issued  only  in  exchange  for  gold  at  nominal 
values,  or  at  all  times  redeemable  in  gold  at  nominal  value,  not 
legal  tender  in  excess  of  $10  for  any  one  specific  payment,  to  any 
extent  the  people  will  desire.  But  when  it  is  proposed  to  go 
further,  and  compel  the  sons  to  accept  the  dollar  of  the  fathers 
to  an  unlimited  amount,  then  an  answer  to  this  proposition,  sim- 
ple and  conclusive,  is  that  the  dollar  of  the  fathers  is  not,  on 
grounds  of  convenience,  adapted  to  our  use.  The  "  sons  "  want 
something  better — the  most  improved  tools  of  trade, — as  they 
want  better  methods  of  conveyance,  of  warming,  of  lighting,  ven- 
tilation, printing,  and  communication  of  news,  than  did  the  fathers. 
They  want,  as  a  condition  for  success  in  business,  the  coin  receiva- 
ble without  discount  by  the  great  commercial  nations  with  which 
the  bulk  of  our  foreign  commerce  is  conducted.     And  herein  is 


THE  SILVER  QUESTION.  57 

another  point  that  ought  not  to  fail  of  receiving  full  consideration, 
namely,  that  whereas,  in  most  cases,  the  first  cost  of  an  improved 
tool  is  greater  at  the  outset  than  that  of  a  poor  and  unimproved 
one,  in  this  case  the  conditions  are  reversed  ;  for  the  first  cost  of 
the  good  tool — a  gold  currency — will  be  no  greater  at  the  outset 
to  the  country  than  the  first  cost  of  the  poor  one — a  silver  cur- 
rency ;  while  in  all  subsequent  respects  the  advantages  are  im- 
measurably in  favor  of  the  gold.  Any  attempt  to  restore  the  old 
silver  dollar  to  its  place  as  lawful  money,  without  qualification  or 
limitation,— to  adopt  a  coin  currency  not  suited  to  our  wants  or 
the  age, — is  as  foolish  and  absurd  as  an  attempt  to  displace 
through  legislation  railroads  by  stage-coaches,  and  steamships  by 
sailing-vessels.  Sovereign  power  can  violate  natural  laws,  the 
same  as  individuals  can  :  but  the  penalty  of  violation  is  inevitable 
in  both  cases. 


"1 


IVX* 


ARE  GOLD  AND  SILVER  INDISPENSABLE  AS  MEAS- 
URES OF  VALUE. 

AN  EPISODE  OF  THE  DAYS  OF  CURRENCY  INFLATION  AND  PAPER 

MONEY. 

IN  a  discusssion  which  occupied  no  small  part  of  the  columns 
of  the  newspaper  press  of  the  United  States  in  1875-77  on 
the  maintenance,  further  inflation,  or  redemption  of  the  then 
"  legal-tender  "  (irredeemable  paper)  currency  of  the  country,  the 
Rev.  Thomas  K.  Beecher,  a  prominent  clergyman,  settled  in  El- 
mira,  New  York,  in  a  communication  to  the  N.  Y.  Nation  (Octo- 
ber, 1875),  submitted  the  propositions,  as  to  whether  there  is  any 
valid  distinction  between  gold  and  legal  tender  (paper)  as  a  measure 
of  value ;  and  whether  the  use  of  gold  and  silver  as  a  measure  of 
value  is  an  indispensable  prerequisite  for  a  sound  and  correct 
system  of  exchange  ;  and  supported  the  negative  view  of  the  same 
by  the  following  course  of  argument  and  illustration. 

"  Agreeing  that  gold  is  a  measure  of  value  that  has  at- 
tained an  almost  world-wide  acceptance,  does  it  follow  that 
gold  should  be  the  only  legal  tender,  and  that  all  currencies 
or  other  debt-certificates  of  whatever  kind  should  be  "  redeemable 
in  gold  only?  I  detect  in  the  general  flow  of  commerce  phe- 
nomena which  I  will  call  closed  circles  of  exchange — i.  e.,  circles 
of  exchange,  within  which  the  same  currency  may  revolve  for 
ever,  independently  of  gold.  Such  circles  are  indeed  little  short 
of  countless.  Some  of  them  are  very  small,  as,  for  instance,  the 
dealings  of  a  grocer  with  his  milkman  ;  the  grocer  taking  five  dol- 
lars' worth  of  milk-tickets  and  crediting  the  milkman  accordingly, 
and  the  milkman  redeeming  the  tickets  in  milk — gold  meanwhile 
serving  the  use  of  a  measure  both  of  the  groceries  and  the  milk. 

"  Am  I  safe  in  asserting  that  whenever  a  closed  circle  like  this 
can  be  demonstrated,  there  is  need  of  neither  gold  nor  silver  as  a 

53 


GOLD  AND  SILVER  AS  MEASURES  OF   VALUE.  59 

legal  tender?  True,  if  either  party  dies  and  the  business  be 
wound  up  by  strangers,  there  must  come  in  an  outside  currency. 
But  so  long  as  the  milkman  and  the  grocer  continue  in  their  re- 
spective relations,  have  we  not  a  trade  of  say  one  hundred  dol- 
lars a  year,  in  which  milk-tickets  serve  all  the  uses  of  currency? 
From  this  smallest  circle  step  at  once  to  the  largest  circle — a 
sovereign  government  like  the  Government  of  the  United  States, 
with  an  undisputed  right  to  tax  the  people — say  two  hundred 
million  dollars  a  year.  The  people  at  large  are  to  pay  to  the 
national  treasury,  in  the  course  of  a  year,  two  hundred  millions 
of  dollars.  The  Government  is  to  disburse  precisely  the  same 
sum  to  the  people.  Have  we  not  here  a  closed  circle — foreign 
creditors  excepted  ? 

"  Where  lies  the  fallacy,  then,  in  asserting  that  any  stable  gov- 
ernment may  wisely  meet  its  obligations  by  issuing  its  notes 
promising  to  pay,  just  as  our  greenbacks  do  promise  to  pay? 
And  inasmuch  as  by  the  tax  law  every  citizen  must  pay  to  the 
Government,  and  these  notes  of  the  Government  by  their  very 
face  are  receivable  for  taxes,  why  not  make  them,  for  all  purposes 
of  internal  commerce,  legal  tender,  their  volume  to  equal  at  least 
the  amount  of  the  annual  budget  ? 

"  The  Treasury  notes  thus  issued  are,  on  a  large  scale,  what 
the  milk-tickets  were  on  a  small  scale. 

"  If  the  Government  has  a  legal  right  to  take  from  citizens  at 
large  two  hundred  million  dollars,  T  am  not  able  to  see  that  there 
is  any  unwisdom  or  injustice  in  requiring  citizens  to  recognize 
Treasury  notes — which  are  legal  tender  to  the  Government — as 
legal  tender  also  in  the  settlement  of  private  accounts,  etc.,  etc." 

To  these  interrogatories  and  deductions,  Mr.  Wells  returned 
through  the  columns  of  the  Nation  the  following  reply,  which,  at 
the  time,  attracted  considerable  attention,  and  was  the  occasion 
also  of  no  little  merriment  on  the  part  of  the  public. 

It  was  prefaced  by  the  editors  of  the  Nation  with  the  follow- 
ing title : 

"  DR.  WELLS*  OPINION  IN  CONSULTATION  ON  MR.  BEECHER'S  CASE." 

"  Mr.  Beecher  says  he  detects  in  the  general  flow  of  commerce 
what  he  is  pleased  to  term  '  closed  circles  of  exchange,'  and  asks 
why  some  currency  other  than  gold  may  not  be  used  and  continue 


6o  PRACTICAL  ECONOMICS. 

to  revolve  for  ever  independent  of  gold  in  such  circles.  To  this  I 
reply  that  I,  for  one,  see  no  objection  to  the  use  of  such  other 
currency,  under  the  conditions  specified.  For  example,  take  the 
illustrations  which  Mr.  Beecher  brings  forward  ;  and,  first,  that  of 
the  grocer  and  the  milkman,  who  exchange  between  themselves 
groceries  for  milk-tickets.  What  objection  can  there  be  to  their 
so  doing,  or  why  should  any  one  interfere  to  prevent  this  little 
arrangement,  any  more  than  any  other  mutually  agreeable  trade  or 
bargain  the  grocer  and  milkman  may  choose  to  make  ?  So,  in 
the  second  case  supposed  by  Mr.  Beecher — namely,  that  of  the 
Government  issuing  notes  promising  to  pay  and  made  receivable 
for  a  year's  taxes — I  can  see  no  objection  to  that  either,  further 
than  that,  as  a  general  rule,  it  is  better  for  Government  and 
individuals  alike  to  pay  cash  down,  rather  than  issue  their  I.  O. 
U.'s  or  get  trusted.  And  if  the  Government  wishes  to  obtain 
commodities  or  services,  and  promises  to  pay  for  them  in  its  own 
notes  or  cabbage-leaves,  and  people  are  found  willing  to  take  such 
notes  or  cabbage-leaves  in  exchange,  I  see  no  reason  for  entering 
any  protest  against  it,  or  calling  on  any  one  to  prevent  the  Gov- 
ernment from  issuing,  on  the  one  hand,  or  the  people  from 
receiving,  on  the  other.  The  highest  right  of  property  is  the 
right  freely  to  exchange  it  for  other  property ;  and  the  highest 
attribute  of  personal  freedom  is  for  each  person  to  determine  for 
himself  under  what  conditions  he  will  render  service.  Thus  far, 
then,  there  is  no  disagreement  in  our  respective  positions.  But 
when  Mr.  Beecher  goes  a  step  further,  and  says  he  is  unable  to 
see  '  any  unwisdom  or  injustice  in  requiring  citizens  to  recognize 
Treasury  notes  [whether  the  same  be  greenbacks  or  cabbage- 
leaves],  which  are  legal  tender  to  the  Government,  as  legal  tender 
also  in  the  settlement  of  private  accounts,'  then  Mr.  Beecher  and 
I  walk  apart ;  and  it  is  just  here,  in  my  opinion,  that  Mr.  Beecher's 
mental  obscurity  about  money  and  legal  tender  begins,  for  he 
seems  unable  to  recognize  any  broad  distinction  between  *  may,' 
or  the  permissive  sense,  and  {  must,'  or  the  compulsive  sense,  in  its 
application  to  money.  To  make  this  clear  let  us  take  an  illustra- 
tion. 

"  Suppose  I  go  on  a  certain  Saturday  to  Elmira,  to  hear  Mr. 
Beecher  preach.  Time  hanging  heavy  while  waiting  for  Sunday 
to  come,  I  stroll  on  Saturday  evening  to  Smith's  pleasant  gambling- 


COLD  AND  SILVER  AS  MEASURES  OF  VALUE.  6l 

saloon  to  have  a  little  amusement,  and  being  at  the  same  time  on 
1  frugal  thought  intent,'  I  conclude  to  risk  but  five  dollars  for  my 
evening's  diversion,  and  so  bet  but  fifty  cents  at  a  time  on  the 
green  cloth.  To  enable  me  to  do  this,  I  get  a  five-dollar  green- 
back exchanged  at  the  cashier's  desk  for  ten  red  ivory  counters, 
or  ■  chips,'  as  they  are  technically  called  ;  and  after  playing  to  my 
heart's  content  I  leave,  and  Sunday  morning  finds  me  at  Mr. 
Beecher's  church.  (I  acknowledge  that  my  conduct  is  rather  in- 
consistent ;  but  it  is  not  my  conduct  that  we  are  looking  after  just 
at  present.)  The  sermon  pleases  me  so  much  that  at  its  close, 
when  a  collection  is  taken  up  to  help  pay  Mr.  Beecher's  well- 
earned  salary,  I  determine  to  contribute  ;  and  finding  one  of  those 
red  chips  I  received  in  exchange  the  night  before  in  my  pocket,  I 
put  it  in  the  hat.  When  the  money  comes  to  be  delivered  over 
to  Mr.  Beecher,  he  very  naturally  expresses  some  surprise  at  find- 
ing this  strange-looking  visitor  nestled  in  among  the  bank-notes, 
the  fractionals,  the  cabbage-leaves,  and  the  milk-tickets,  and  asks 
what  it  all  means. 

"  To  this  I  may  be  supposed  to  respond  that  the  chip  is  cur- 
rency, '  revolving  perfectly  in  the  closed  circle '  of  the  faro-bank, 
and  fulfilling  within  that  circle  all  the  offices  of  money,  indepen- 
dently of  gold.  Mr.  Beecher  has  only  to  go,  after  church,  down 
to  Smith's  saloon,  and  present  the  red  chip  I  have  given  him  to 
Jones,  the  cashier,  and  Jones  will  either  allow  him  to  bet  with  it 
or,  if  the  bank  was  not  cleaned  out  the  night  before  or  seized  by 
the  police,  will  probably  redeem  it  in  a  fifty-cent  scrip.  '  But,  my 
dear  sir,'  responds  Mr.  Beecher,  '  I  am  a  minister,  and  I  don't 
want  to  be  seen  going  into  Smith's  saloon.'  I  answer  :  *  I  suppose 
it  would  be  somewhat  disagreeable  to  you,  but  you  can  give  this 
chip  to  the  milkman,  the  grocer,  or  the  Government  tax-collector 
to-morrow  morning.  They  understand  all  about  these  "  close 
circles  "  of  exchange ;  they  will  take  it.'  *  But  I  am  not  so  certain 
of  that,'  says  Mr.  Beecher.  '  How  will  they,  any  more  than  I, 
know  what  its  value  is,  or  whether  it  will  be  redeemed  in  any 
thing  else?'  ■ Don't  trouble  yourself  about  that  matter,'  I 
rejoin ;  l  I  have  fixed  all  that.  I  happened  to  be  a  member  of 
Congress  last  year,  and  after  devoting  two  weeks'  earnest  study  to 
the  subject  of  finance,  I  was  not  able  to  see,  any  more  than  you 
now  are,  "that  there  is  any  unwisdom  or  injustice  in  requiring 


62  PRACTICAL  ECONOMICS. 

citizens  to  recognize  Treasury  notes  "  and  gambling  chips — the 
one  of  which  is  legal  tender  to  the  Government,  and  the  other 
legal  tender  in  the  faro-bank — "  as  a  legal  tender  also  in  the  settle- 
ment of  private  accounts."  More  than  this,  the  ivory  chips  are 
prettier  than  the  greenbacks,  and  more  convenient  for  carrying ; 
and  what  better  device  can  there  be  for  indicating  their  difference 
in  value  than  by  a  change  in  their  color  ?  They  have  also  in  per- 
fection another  attribute  of  really  good  money,  inasmuch  as  they 
are  non-exportable  ;  and  if  we  take  into  consideration  the  number 
of  fights,  feuds,  and  murders  that  take  place  in  gambling-saloons, 
I  think  that  we  are  fairly  entitled  to  claim  for  the  chips  that  they 
are  "  battle-born  "  and  "  blood-stained."  So  I  accordingly  per- 
suaded the  National  Legislature  to  pass  a  law  making  Treasury 
notes,  gamblers'  chips,  milk-tickets,  and  every  other  instrumen- 
tality of  exchange  which  is  capable  of  revolving  perfectly  in  a 
closed  circle,  legal  tender  in  payment  for  all  private  debts.  '  You 
see  it  now,  don't  you,  Mr.  Beecher?'  'I  rather  think  I  do,' 
responds  Mr.  B. ;  '  but  at  the  same  time  I  wish  that  when  you 
next  come  to  hear  me  preach,  and  feel  that  I  have  rendered  you 
a  service  and  strengthened  you  up  to  further  good  work  in 
Washington,  you  would  give  me  something  that  don't  belong 
to  a  closed  circle  of  exchange — something  that  I  shall  not  feel 
obliged,  before  accepting,  to  examine  a  statute-book,  read  my 
Bible,  consult  the  resolutions  of  the  last  political  convention,  or 
wait  the  news  of  an  election  in  Ohio,  to  decide  whether  I  had 
better  take  it,  and,  if  I  do  take  it,  how  much  I  can  get  for  it.' 

"  Seriously,  however,  the  trouble  with  Mr.  Beecher  and  a  good 
many  other  persons  is,  that  they  fail  to  recognize,  that  '  legal 
tender,'  whose  father  is  Government  and  whose  mother  a  Statute 
Law,  is  a  suspicious  character,  and  has  been  engaged  in  all  man- 
ner of  disreputable  transactions  ever  since  he  was  born  ;  whilst 
gold  and  silver,  of  acknowledged  weight  and  purity — i.  e.,  coined 
money— are  nature's  noblemen,  whose  patent  of  honesty  is  so 
written  on  their  front  that  they  require  no  passport,  in  the  shape 
of  a  legal-tender  statute,  to  find  acceptance  everywhere,  as  the 
universal  equivalent  for  all  exchangeable  commodities  and  ser- 
vices, and  as  the  universal  solvent  for  all  debts  ;  and,  furthermore, 
that  no  matter  how  great  may  be  their  recommendation  on  the 
score  of  cheapness,  it  is  very  poor  economy  for  a  man  or  a  com- 


GOLD  AND  SILVER  AS  MEASURES  OF  VALUE.  63 

munity  to  work  with  poor  tools  or  dishonest,  tricky  servants  if 
good  tools  and  honest  servants  are  available. 

"  Money  existed  before  statutes,  and  owes  its  origin  to  man's 
instincts  or  natural  promptings.  Gold  and  silver  came  into  use  as 
money  also  before  statutes,  and  were  made  choice  of  for  use  as 
money  for  exactly  the  same  reason  that  men  have  made  choice  of 
cotton,  flax,  wool,  and  silk  as  materials  for  clothing,  and  stone, 
brick,  and  timber  as  materials  for  houses ;  because  they  best  of  all 
things  supply  certain  wants  and  necessities. 

"  If  the  Government  will  confine  itself  simply  to  the  business 
of  saying  how  much  pure  gold  and  silver  shall  be  entitled  to  use 
the  name  of  *  dollar '  ;  that  the  standard  of  a  dollar  once 
judiciously  fixed  shall  never  be  changed  ;  that  everybody  who 
talks  dollars  shall  always  and  under  all  circumstances  be  under- 
stood to  mean  but  this  one  kind  of  dollar ;  that  any  promises  to 
pay,  without  specifying  what  the  payment  is  to  be  in,  shall  also  be 
interpreted  to  mean  the  acknowledged  standard — if  the  Govern- 
ment will  do  these  things,  and  these  things  only,  then  all  legal-tender 
laws  may  be  wiped  at  once  off  the  statute-books,  and  everybody 
will  be  better  for  it.  And  when  that  day  comes,  if  the  milkman, 
grocer,  keeper  of  faro-bank,  or  children  on  a  rainy  day  up  in  an 
old  garret,  want  to  trade,  swap,  barter,  or  exchange,  and  use  milk- 
tickets,  ivory  chips,  or  pieces  of  old  newspapers  respectively, 
to  serve  as  memoranda,  checks,  counters,  or  symbols,  I  will 
promise  Mr.  Beecher  that  no  one  will  object ;  unless  the  milkman, 
grocer,  faro-bank  keeper,  or  garret  children  want  to  make  them 
legal  tender,  and  compel  him,  and  me,  and  all  other  persons, 
because  of  the  artificial  character  thus  given  them,  to  take  them 
in  payment  of  commodities  and  services,  when  we  don't  want  to." 

"  I  am  yours,  most  respectfully, 

"  David  A.  Wells." 


TARIFF  REVISION :  ITS  NECESSITY  AND  POSSIBLE 

METHODS. 


THE  old  writers,  before  the  discovery  of  America,  were  ac- 
customed to  indulge  in  all  manner  of  fanciful  specula- 
tions respecting  the  conditions  and  actions  of  the  people  on  the 
"  other  side"  of  the  world,  or  their  antipodes,  supposing,  indeed, 
that  there  were  any.  It  was  generally  agreed  that  they  must  walk 
with  their  heels  upward  and  their  heads  hanging  down,  and  do 
everything  in  a  reverse  order  from  that  which  was  then  regarded 
as  proper  and  natural  in  the  Old  World  experience.  A  little  prac- 
tical experience,  however,  in  enlarged  navigation  soon  showed 
the  absurdity  of  such  imaginings  ;  and  yet  if  the  old  speculators 
had  restricted  the  sphere  of  their  imaginings  to  the  mental  rather 
than  the  physical  actions  of  the  "  other  side"  men,  they  might 
not  have  been  considered  by  posterity  so  far  out  of  the  way  in 
their  conclusions.  For  America,  or  rather  that  part  of  it  known 
as  the  United  States,  has  always  been  to  Europe  a  country  of 
surprises  or  contraries,  in  most  matters  political,  financial,  eco- 
nomic, and  theological.  And  of  these  surprises  none  could  be 
more  remarkable  than  that  one  of  the  two  great  parties  into  which 
the  country  is  politically  divided  should  regard  the  continued 
maintenance  in  time  of  peace  of  an  extraordinary,  onerous,  and 
unnecessary  system  of  taxation  as  a  policy  likely  to  insure  to 
it  a  popular  favor  and  support ;  while  the  other  great  party, 
either  through  ignorance  or  cowardice,  shirks  the  issue,  hesitates 
to  boldly  array  itself  in  favor  of  exempting  the  masses  from  ex- 
cessive public  burdens,  and  through  some  of  its  chief  leaders 
even  favors  the  policy  and  tries  to  do  business  on  the  capital 

of  its  opponents.     In  short,  taxation  in  excess  of  any  legitimate 

64 


TARIFF  REVISION.  65 

requirements  of  the  State — the  thing  which  in  all  other  countries 
has  heretofore  been  regarded  by  politicians  and  statesmen  as 
the  certain  precursor  of  popular  wrath  and  party  defeat — has 
really  in  the  United  States  come  to  be  looked  upon  as  a  good 
thing  in  itself,  and  as  politically  and  economically  expedient. 
"  If  there  were  no  public  debt,  no  hit er est  to  pay,  no  pension-list \ 
no  army  or  navy  to  support,  I  should  still  oppose  *  tariff  for  reve- 
nue only*  and  favor  protective  duties"  {taxes).  {Speech  of  Hon. 
Win.  P.  Frye,  Senate  of  the  U.  S.,  Feb.  10,  1882.)  Again  in  a  de- 
bate in  the  U.S.  House  of  Representatives,  March  4th,  1882,  on 
a  proposition  to  reduce  or  abolish  the  oppressive  and  obsolete 
fees,  exactions,  and  formalities  of  the  existing  consular  system 
of  the  United  States,  Frank  Hiscock,  a  representative  of  the 
State  of  New  York — a  State  that  is  pre-eminently  commercial — 
after  admitting  the  existence  of  the  grievances  alleged,  never- 
theless declared  himself  in  favor  of  their  continuance,  and  simply 
for  the  reason  that  they  were  an  obstruction  to  commerce ;  and 
if  removed  it  might  be  difficult  to  replace  them  with  other  equiv- 
alent obstructions.  Out  of  such  a  curious  state  of  things  have 
come  certain  results  so  plain  "  that  he  may  run  who  reads," 
and  which  may  be  enumerated  in  part  as  follows : 

First.  The  annual  gathering  through  the  tax-gatherer  of  a 
surplus  revenue  of  from  one  hundred  to  one  hundred  and  fifty 
millions  of  dollars  in  excess  of  any  legitimate  requirements  of 
the  government;  the  same  constituting  a  constant  incentive 
for  needless  and  corrupt  expenditures,  the  multiplication  of 
offices,  and  the  enlargement  of  the  sphere  of  influence  of  the 
federal  government.  The  rapid  reduction  of  the  public  debt 
occasioned  by  the  war  has  been  a  never-ending  theme  of  na- 
tional self-congratulation ;  but  taking  taxation  as  the  measure 
of  the  burden  of  obligation  which  the  war  entailed  upon  the 
country  (and  it  is  the  only  proper  measure),  the  war  debt  has 
in  reality  been  diminished  by  a  sum  which  in  comparison  with 
the  national  receipts  of  revenue  is  very  inconsiderable.1 

1  Thus  the  current  burden  of  the  war  debt  (omitting  the  repayments  of  the  prin- 
cipal of  the  debt,  which  is  not  in  the  nature  of  a  demand  obligation)  is  the  annual 
taxation  required  to  provide  means  for  the  payment  of  interest  on  the  debt,  and 
the  requirements  for  pensions.  The  largest  obligation  incumbent  on  the  Uni- 
ted States  in  any  one  year  on  account  of  national  debt-interest  was  in  1867,  and 
amounted  to  $143,781,000.     The  disbursements  for  pensions  during  that  same 


66  PRACTICAL   ECONOMICS 

Second.  A  condition  of  things  in  which  the  country  depends 
almost  exclusively  on  its  harvests  for  its  prosperity,  and  has 
no  export  trade  worth  mentioning  except  in  the  raw  produce 
of  its  soil,  representing  in  the  form  in  which  it  is  exported  the 
minimum  of  embodied  labor.  In  place  of  an  annually  increas- 
ing ability  on  the  part  of  the  nation  to  withstand  foreign  com- 
petition in  respect  to  the  production  of  the  so-called  products  of 
manufacturing  industries,  all  the  evidence  points  in  the  opposite 
direction ;  our  exports  of  manufactured  articles  forming  a  con- 
siderably smaller  percentage  of  the  total  exports  in  1879-80  than 
they  did  in   1859-60.1     Never,  moreover,  in  the  history  of   the 

year  were  $20,936,000.  In  1871,  six  years  after  the  termination  of  the  war,  and 
when  it  is  reasonable  to  infer  that  nearly  every  person  who  had  a  legitimate  claim 
for  injuries  directly  and  immediately  contingent  on  his  service  in,  or  to,  the  fed- 
eral armies  had  presented  the  same  and  made  a  settlement  with  the  government, 
the  pension  disbursements  amounted  to  $34,443,000;  and  after  reaching  this 
maximum,  the  annual  expenditure  on  this  account,  in  accordance  with  all  former 
experience  of  the  United  States  and  other  countries,  and  also  with  the  life-expec- 
tation tables  of  life-insurance  companies,  began  to  rapidly  decrease,  and  in  1878 
had  become  reduced  tc  $27,137,000.  The  payments  on  account  of  interest  during 
this  same  year  were  $125,576,000.  The  direct  aggregate  burdens  of  the  war  debt, 
as  measured  by  taxation  and  expenditures,  were  therefore  $164,717,000  in  1867  and 
$152,713,000  in  1871;  on  the  other  hand,  the  obligations  on  the  part  of  the  govern- 
ment for  interest  on  the  public  debt  ($57,360,000  on  the  1st  of  July,  1882)  and  for 
pensions  ($100,000,000  actually  appropriated)  will  probably  amount  for  the  current 
fiscal  year  to  about  $150,000,000;  thus  making  the  aggregate  burden  of  the  present 
war  debt  but  little  less  than  it  was  soon  after  the  close  of  the  war.  For  the  future, 
some  who  have  made  a  very  careful  study  of  the  matter  do  not  hesitate  to  predict 
that  the  enactment  of  the  so-called  "arrears  of  pensions"  law  (in  accordance  with 
which  every  man  who  served  in  the  army  or  navy  of  the  United  States  during  the 
war  and  was  discharged  in  fair  health  is  practically  considered  to  have  a  valid 
claim  for  a  pension  against  the  United  States  on  account  of  personal  disabilities 
contingent  on  advancing  age)  will  entail,  from  first  to  last,  a  further  aggregate 
expenditure  on  the  country  of  not  less  than  two  thousand  millions  of  dollars. 

1  The  ratios  which  the  exports  of  the  unmanufactured  and  manufactured  pro- 
ducts from  the  United  States  have  sustained  to  each  other  during  the  three  decen- 
nial periods  included  between  the  years  1859-60  and  1879-80  are  as  follows: 

1879-80.  1869-70.  1859-60. 
Per  cent  Per  cent  Per  cent 
of  total,      of  total,     of  total. 

Unmanufactured  products 87.5  86.6  82.3 

Manufactured  do 12.5  13.4  17.7 

Unmanufactured  products  have  risen,  therefore,  from  being  82.3  per  cent  of 
the  total  exports  in  1859-6010  87.5  percent  in  1879-80;  while,  during  the  same 
period,  manufactures  have  fallen  from  17.7  per  cent  to  12.5  per  cent. 


JJV17M 

country  has  the  import — responsive  to  domestic  demand 
ready  sale — of  the  products  of  foreign  industries  into  the  United 
States  been  greater  than  at  present  (1882)1;  while,  on  the 
other  hand,  the  stocks  of  American  manufactured  products  con- 
tinually tend  to  accumulate  and  bring  on  the  stagnation  and 
disaster  consequent  on  what  is  termed  "  over-production." 

Third.  The  "  merchant  marine,"  or  carrying  trade,  of  the 
United  States  upon  the  ocean — a  branch  of  national  industry 
once  second  only  in  importance  to  agriculture — has  practically 
ceased  to  exist.  Differ  as  men  may  as  to  the  proper  remedial 
legislation  for  such  a  state  of  things,  there  ought  to  be  no  dif- 
ference of  opinion  as  to  its  cause.  Commerce  is  the  interchange 
of  commodities  and  services  between  men  and  men  and  coun- 
tries and  countries ;  and  its  one  essential  condition  of  existence 
and  growth  is  that  such  exchanges  shall  be  reciprocal.  To  sell 
we  must  buy,  and  in  order  to  buy  we  must  sell.  Now  for  many 
years  the  policy  of  the  United  States  has  been  to  impose  taxes 
with  the  avowed  purpose  of  restricting  so  much  of  the  commerce 
of  the  country  as  is  carried  on  by  the  agency  of  ships  upon  the 
ocean ;  and  that  it  has  been  eminently  successful  in  its  results 
will  not  be  disputed.  If  it  were  not  a  most  serious  matter,  it 
ought  to  be  regarded  as  a  huge  joke,  to  propose,  as  has  recently 
been  done,  to  assemble  the  several  American  States  by  their  rep- 
resentatives in  a  Congress,  and  try  to  get  them  to  reverse  the 
principles  of  human  nature  by  agreeing,  on  account  of  neighbor- 
hood and  good  feeling,  to  permanently  trade  at  the  United 
States  shop,  when  a  shop  across  the  way  offers  to  sell  cheaper 
and  take  the  products  of  the  purchaser  in  barter  payment.  It 
can't  be  done. 

Fourth.  That  the  market  for  the  products  of  the  manufac- 
turing industries  of  the  United  States  is  practically  limited  to 
the  requirements  for  home  consumption,  and  that  the  power  of 
domestic  production  in  all   branches  of   industry,  consequent 

1  The  imports  of  merchandise  have  never  been  so  large  as  in  the  fiscal  year 
ending  June  30,  1882.  The  largest  imports  of  any  one  year  prior  to  1880  oc- 
curred in  1873  and  amounted  to  $642,136,000.  For  1880  the  aggregate  was 
$667,954,000,  but  for  the  fiscal  year  1882  the  imported  values  were  returned  at 
$724,623,000;  of  this  increase,  $10,533,000,  or  12  percent  of  the  present  aggre- 
gate import  of  $93,000,000,  occurred  in  the  class  of  metals,  and  $23,731,000  in 
articles  of  clothing. 


68  PRACTICAL    ECONOMICS. 

upon  the  application  of  machinery,  conjoined  with  high  intel- 
ligence, to  our  great  natural  resources,  continually  tends  to  ex- 
ceed the  power  of  domestic  consumption,  are  facts  too  evident 
to  be  disputed.  The  natural,  nay  more,  the  inevitable,  outcome 
of  such  a  condition  of  affairs  is  an  effort  on  the  part  of  the 
producer  to  prevent  the  accumulation  of  a  surplus,  by  restrict- 
ing production  and  keeping  a  part  of  his  machinery  idle ;  and 
this  in  turn  means  limitation  of  the  opportunity  for  employment 
to  the  laborer.  The  manufacturer  also  sees  clearly,  that  if  he 
could  produce  and  sell  cheaper  he  could  enlarge  his  markets, 
and  at  least  maintain  if  he  did  not  enlarge  the  sphere  of  his 
business  activity  ;  but  having  become  thoroughly  indoctrinated 
with  the  idea  that  the  maintenance  of  a  system  of  national  taxa- 
tion, which  abnormally  augments  the  cost  of  all  his  services  and 
supplies,  is  absolutely  essential  to  his  industrial  prosperity,  and 
even  existence,  he  naturally  opposes  any  reduction  of  taxes, 
denounces  as  unpatriotic  and  visionary  those  who  favor  such 
reductions,  and  as' naturally  seeks  to  avail  himself  of  the  only 
other  avenue  open  to  him  for  cheapening  the  cost  of  his  products, 
namely,  that  of  cheapening  his  supply  of  labor.  This  the 
laborer  resists,  and  the  outcome  of  this  resistance  is  seen  in 
strikes,  local  disturbances,  and  the  extensive  interruption  of  the 
business  and  exchange  of  the  country  such  as  has  characterized 
the  history  of  the  present  year.  But  what  chance  has  the 
laborer  for  successful  resistance,  with  a  limitation  of  market  for 
the  sale  of  the  products  of  his  industry  and  an  annual  import  of 
700,000  foreign  laborers,  ready  to  compete  for  and  embrace 
every  opportunity  for  domestic  employment  ?  Under  such  cir- 
cumstances there  is  no  possibility  of  any  strike  or  resistance  orT 
the  part  of  labor  being  successful ;  and  the  result  of  recent  ex- 
perience might  have  been  predicted  in  the  absolute  certainty  at 
the  commencement  of  the  present  year,  as  can  be  at  present 
predicted  of  the  future. 

One  of  the  most  notable  of  the  strikes  of  the  year,  that  of 
the  freight-handlers  upon  the  piers  and  at  the  railroad  termini 
of  New  York,  is  full  of  teachings  of  the  utmost  interest  and 
importance.  The  question  was  put  at  the  commencement  of 
the  difficulties,  by  the  writer,  to  the  foreman  of  a  body  of  freight- 
handlers — not  participating  in  the  strike — on  one  of  the  steam- 


TARIFF  REVISION.  69 

boat  piers  of  New  York:  "  Is  the  strike  likely  in  your  opinion 
to  be  successful  ?"  "  There  is  not  a  ghost  of  a  chance  for  suc- 
cess," was  the  prompt  reply.  "  Why  not?"  Ans.\  "Simply 
for  the  reason  that  two  men  stand  ready  to  do  the  work  that 
offered  for  only  one."  "  Have  the  laborers,  then,  no  remedy 
for  their  grievances?"  Ans. :  "Yes;  let  us  have  a  law  pro- 
hibiting  the  coming  in  of  all  those  laborers  from  Europe." 
"  Do  you  think  the  enactment  of  such  a  law  possible?"  Ans.  : 
"Yes;  if  the  laborers  all  over  the  country  were  united  in  de- 
manding it,  the  politicians  would  soon  bring  it  about."  Now, 
whatever  may  be  thought  of  the  remedy  proposed,  there  can  be 
no  doubt  that  the  man  thus  interrogated  had  a  clear  view  of 
the  situation,  and  its  utter  hopelessness  so  far  as  it  concerned 
the  strikers. 

But  let  us  further  consider  this  matter.  The  strikers  were, 
it  is  understood,  in  receipt  of  seventeen  cents  per  hour,  and 
demanded  twenty,  on  the  ground  that  the  former  sum  was  in- 
adequate for  the  support  of  themselves  and  their  families. 
Popular  sympathy  was  unquestionably  on  the  side  of  the 
laborers  and  adverse  to  the  railroads.  The  general  public,  in 
their  indignation  at  the  result  of  railroad  management  on  the 
part  of  certain  individuals,  are  prone  to  overlook  the  great 
service  that  the  railroad  system  of  the  United  States  has  ren- 
dered ;  to  forget  that  no  other  one  agency  in  all  time  has  been 
more  productive  of  benefit  to  the  laborer — using  the  term  in  its 
ordinary  sense, — by  enlarging  the  sphere  of  his  employment, 
cheapening  product,  and  creating  abundance ;  and  that  by  it 
the  cost  of  transportation  has  now  been  so  far  reduced,  that  one 
day's  wages  of  the  most  ordinary  laborer  in  New  York  will 
suffice  to  pay  the  cost  of  the  movement  from  Chicago  to  New 
York  of  all  the  meat  and  grain  that  he  can  consume  in  a  year — 
thereby  placing  such  laborer  in  New  York,  so  far  as  the  prime 
cost  of  his  food  is  concerned,  on  a  par  with  the  laborer  that 
lives  where  food  is  the  cheapest  on  this  continent ;  and  that  in 
comparison  with  these  benefits,  all  the  injury  that  has  resulted 
from  "  stock-watering"  and  diversion  or  squandering  of  railroad 
capital  or  receipts,  great  and  reprehensible  as  this  may  have 
been,  is  relatively  but  as  "  the  small  dust  upon  the  balance." 
But  in  the  frame  of  mind  that  the  public  then  were  (and  now 


70  PRACTICAL    ECONOMICS. 

are)  the  expression  was  most  common,  that  the  demands  of  the 
strikers  were  most  reasonable,  and  that  the  railroads  ought  will- 
ingly to  accede  to  them.  Now  if  these  expressions  were  any- 
thing more  than  mere  sentiment,  the  "  ought  M  must  have  had 
a  foundation  on  the  principles  of  either  "charity"  or  "equity;" 
if  the  former,  then  the  issue  pertains  to  the  province  of  the 
moralist  or  philanthropist  rather  than  to  the  economist ;  and  if 
the  latter,  the  economic  question  most  pertinent  is,  according  to 
what  principles  of  justice  or  equity  ought  a  railroad  or  any  other 
corporation  to  be  asked  or  expected  to  pay  more  for  what  it 
desires  to  buy  and  use — be  it  material  or  labor — than  the  cur- 
rent rates  established  for  the  same  in  the  open  market  ?  And 
if  public  opinion  could  force  such  a  reversal  of  the  laws  of  trade, 
does  anyone  suppose  that  such  an  arrangement  could  be  perma- 
nent, and  not  utterly  disastrous  to  the  general  business  interests 
of  the  country?  But  had  not  the  strikers  any  real  grievances? 
Most  certainly  they  had.  They  had  found  out  that  their  ability 
to  earn  a  comfortable  livelihood  for  themselves  or  their  families 
was  becoming  impaired;  they  had  learned  generally  by  hard 
experience  what  scientific  investigation  has  demonstrated  speci- 
fically, namely,  that  what  of  grain,  meats,  dairy  products,  sugar, 
other  food,  clothing,  metals,  and  lumber  an  expenditure  of  $1.08 
would  have  given  them  in  November,  1878,  would  have  re- 
quired an  outlay  of  $1.28  in  November,  1880 — before  the  drought 
influences  of  the  succeeding  year — and  $1.44  in  June,  1882,  for 
the  obtaining  of  the  same  quantities ;  or  that,  wages  remaining 
the  same,  the  fall  in  wages  owing  to  a  decrease  in  their  purchas- 
ing power,  comparing  the  first  half  of  1 88 1  with  the  first  half  o£ 
1882,  was  equivalent  to  ten  per  cent.  And  becoming  painfully 
sensible  of  such  results,  without  recognizing  their  causes,  both 
strikers  and  the  public  made  haste  to  put  the  blame  on  the  rail- 
roads, when  the  railroads,  through  their  management,  were  no 
more  responsible  than  any  other  portions  of  the  body-politic. 
Had  the  situation  prompted  the  inquiry  of  how  it  was  that  the 
strikers,  while  receiving  the  full  market  rates  for  their  labor,  and 
probably  the  highest  nominal  wages  that  are  regularly  paid  for 
similar  services  anywhere  on  the  face  of  the  globe,  should  yet 
feel  themselves  unable  to  live  comfortably  on  their  wages ;  and 
how  it  is  that  this  land  of  abundance,  which  is  ever  ready  to 


TARIFF  REVISION.  7 1 

supply  the  food  deficiencies  of  all  other  nations,  has  been  made 
one  of  the  dearest  countries  of  the  world  to  live  in, — had  these 
inquiries  been  instituted  and  intelligently  prosecuted,  a  rational, 
and  indeed  the  essential  primary  step  in  the  way  of  bettering 
the  situation  would  have  been  taken.  And  as  indicating  in  part 
what  suoh  an  inquiry  would  have  brought  out  respecting  the 
influence  of  the  present  system  of  excessive  Federal  taxation, 
attention  is  asked  to  the  following  facts: 

Federal  taxes,  both  direct  and  indirect,  with  very  few  ex- 
ceptions, are  levied  on  commodities,  fall  on  consumption,  and 
must  be  paid  by  the  consumer  in  the  increased  price  of  the 
things  he  consumes.  Hence  it  follows  that  the  burden  of  such 
taxes  must  be  disproportionately  heavier  on  the  man  who  from 
necessity  expends  all,  or  nearly  all,  of  his  wages,  salary,  or  other 
income  in  mere  living,  than  on  he  who  only  expends  one  half, 
one  third,  or  a  smaller  proportion  of  his  income  for  like  pur- 
poses, and  lays  up  the  surplus  for  increasing  his  resources. 
Under  ordinary  circumstances  any  disproportionate  taxation 
falling  upon  the  entire  class  of  laborers  would  be  speedily  equal- 
ized by  an  advance  in  wages  ;  but  with  a  tendency  to  the  limita- 
tion of  employment  through  limitation  of  markets,  and  the 
present  extraordinary  influx  of  foreign  competitive  labor,  such 
equalization  is  very  difficult,  if  not  absolutely  impossible.  Every 
dollar  raised  by  the  government  by  taxation  for  any  other  pur- 
pose than  to  provide  revenue  for  its  most  economical  adminis- 
tration constitutes,  therefore,  a  heavier  burden  on  the  recipients 
of  small  incomes  and  wages  than  upon  any  other  class  of  the 
community. 

Recent  investigations  have  shown  that,  accepting  the  highest 
reasonable  estimate  that  can  be  made  of  the  value  of  the  annual 
product  of  the  nation,  and  supposing  the  same  to  be  divided 
equally  among  our  present  population,  the  average  income  of 
each  person — out  of  which  subsistence,  savings,  education, 
means  of  enjoyment,  reparation  of  waste,  and  taxes  are  to  be 
provided — would  not  be  in  excess  of  fifty,  and  probably  not 
over  forty  cents  per  day.  But  as  a  practical  matter,  we  know 
that  the  annual  product  is  not  divided  equally,  and  never  can 
be,  and  that  some  receive  the  annual  average  as  stated  multi- 
plied by  hundreds  and  thousands;  which  of  course  necessitates 


71  ,  PRACTICAL    ECONOMICS. 

that  very  many  others  shall  receive  proportionally  less.  When 
now  it  is  further  considered  that  the  present  aggregate  of 
federal,  State,  and  municipal  taxation  in  the  United  States 
probably  amounts  to  seven  per  cent  on  the  value  of  the  entire 
annual  product  of  the  country,  and  that  the  unnecessary  taxa- 
tion of  one  hundred  millions  which  the  federal  government 
now  collects  from  the  people  is  equal  to  fifteen  or  twenty  per 
cent  of  what  the  whole  people  annually  save  from  the  product 
of  their  labors  (taking  no  account  of  the  additional  burden 
which  the  imposition  of  such  taxation  entails  through  increase 
of  prices,  taxation  which  the  people  pay  but  which  the  govern- 
ment does  not  receive),  it  is  possible  to  form  some  idea  of  how 
a  fiscal  policy  of  large  taxation,  which  so  many  politicians  and 
so-called  statesmen  advocate  as  in  the  interest  of  the  masses, 
fearfully  intrenches  on  the  narrow  measure  of  comfort  which 
the  masses  under  the  most  favorable  circumstances  can  obtain. 
Such  "  taxes,"  says  Mr.  Atkinson,  alluding  to  the  fact  before 
noticed,  that  the  federal  taxes  fall  on  commodities,  "  take  from 
the  many  what  they  may  actually  need  for  a  bare  subsistence ; 
they  must  fall  with  greatest  hardship  on  those  whose  earnings 
for  their  families  are  less  than  the  average  dollar  a  day  to  each 
adult  man  and  woman ;  and  while  our  present  excess  of  national 
taxation  may  be  equal  to  only  fifteen  per  cent  of  the  possible 
savings  of  the  whole  people,  it  may  take  a  hundred  per  centy 
even  the  little  all,  of  what  the  poor  may  save."  Doubtless 
some  may  point  to  the  great  immigration  that  flows  in  upon  us 
from  other  countries,  and  claim  that  this  fact  is  a  sufficient 
answer  to  the  above  statement ;  inasmuch  as  it  proves  that  the 
masses  in  this  country  have  advantages  which  are  not  to  be 
found  elsewhere.  Now  so  far  as  these  advantages  are  natural 
this  claim  is  not  be  denied ;  but  its  admission  does  not  affect  or 
answer  the  real  question  at  issue,  which  is,  To  what  extent 
have  our  great  natural  advantages — which  ought  to  insure  com- 
fort and  abundance  to  every  industrious  person — been  neutral- 
ized or  impaired  to  the  masses  by  the  economic  policy  which 
we  have  as  a  nation  adopted?  The  multitudes  who  during 
the  past  summer,  from  Nebraska  to  New  York,  "struck"  for 
alleged  insufficient  returns  for  their  labor — as,  for  example,  the 
coal-miners  of  Pennsylvania,  whom  Hon.  Abram  S.  Hewitt  in 


TARIFF  REVISION.  73 

the  United  States  House  of  Representatives  in  March,  1882, 
declared  to  be,  from  his  own  personal  knowledge,  "  absolutely 
suffering  for  the  necessities  of  life" — were  all,  undoubtedly,  the 
European  immigrants  of  a  few  years  ago.  And  if  so,  do  not 
their  proceedings  prove  that  they  are  no  more  content  with  the 
existing  state  of  things  in  this  country  than  they  were  in  the 
countries  of  the  Old  World  from  whence  they  emigrated  ? 

The  plea  has  recently  been  put  forward  in  defence  of  the 
continuance  of  our  present  system  of  tariff  taxation,  that  it  is 
the  best  system  for  accomplishing  a  desirable  thing,  namely, 
the  taxation  of  capital  for  the  benefit  of  labor.  It  would,  how* 
ever,  probably  puzzle  the  proponent  to  tell,  how  such  taxes  can 
be  made  to  "  stick"  upon  capital  in  any  greater  proportion  than 
upon  labor ;  or  even  in  anything  like  as  great  a  ratio.  Forall  ex. 
perience  shows  that  when  capital  is  thus  taxed  it  simply  advances 
the  tax,  and  requites  itself  for  the  advance  by  taking  two  or 
three  times  as  much  for  itself.  The  most  effectual  way  of 
primarily  doing  the  thing,  which  a  candidate  for  Congress  from 
New  Jersey  has  recently  proclaimed  to  be  most  desirable,  is  to 
adopt  the  "  Sicilian"  or  "  Greek"  economic  method,  of  forcibly 
abducting  capital  as  represented  by  the  individual,  carrying  it 
off  to  a  cave,  and  compelling  it,  under  fear  of  prospective  loss 
of  ears  or  hands,  to  disgorge,  and  then  sharing  the  proceeds  of 
the  assessment  among  the  laborers.  But  the  ultimate  trouble 
here  would  be,  that  as  soon  as  capital  found  out  that  it  was 
liable  to  be  thus  arbitrarily  treated,  and  could  not  easily  requite 
itself  for  forced  contributions,  it  would  run  away  to  some  place 
where  it  could  be  better  treated ;  and  if  there  were  no  such 
places,  as  was  the  case  in  the  middle  ages,  then  it  would  hide 
itself  in  holes  in  the  ground,  or  other  secret  places,  as  it  does  now 
in  Turkey  and  Egypt — countries  where  the  New  Jersey  principle 
is  especially  exemplified,  thus  narrowing  the  sphere  if  it  did  not 
wholly  deprive  the  laborer  of  profitable  employment.  Certainly, 
to  borrow  an  expression  of  the  late  H.  C.  Carey,  the  activity  of 
"societary  circulation,"  the  cause  of  all  material  development, 
would  be  greatly  impaired  under  such  circumstances. 

The  paramount  necessity  of  the  hour — whether  the  masses 
under  the  education  before  alluded  to,  which  they  have  received, 
respecting  the  blessings  of  taxation,  as  yet  fully  appreciate  it 


74  PRACTICAL   ECONOMICS. 

or  no — is  the  reduction  of  Federal  taxation,  and  any  political 
party  which  fails  to  recognize  it  will,  sooner  or  later,  have  rea- 
son to  repent  of  its  lack  of  sagacity.  That  an  abatement  of 
one  hundred  millions  in  the  taxes  now  annually  collected  by 
the  Federal  Government,  or  one  seventh  of  the  entire  present 
burden  of  taxation  upon  the  whole  country,  can  be  made  with- 
out in  any  way  deranging  the  national  finances  or  reducing  to  a 
corresponding  extent  the  national  revenues,  will  not  probably 
be  questioned.  It  should  not  be  overlooked,  however,  in  con- 
sidering this  whole  prospective  work  of  revenue  reform^  that  the 
question  of  immediate  importance  is  not  so  much  how  large  a 
sum  shall  be  abated,  but  rather  by  what  method  shall  the 
abatements  be  effected ;  for  under  the  existing  fiscal  policy  of 
the  nation,  which  has  been  also  long  continued,  many  vested 
interests  have  grown  up  and  been  fostered  which  are  entitled  to 
the  largest  and  most  generous  consideration,  and  which  cannot 
be  arbitrarily  and  suddenly  interfered  with,  without  occasioning 
such  changes  in  the  direction  of  industry  as  may  work  great 
temporary  injury  to  not  a  few  persons.  With  the  most  honest 
intent,  it  will  be  only  too  easy  for  tax  reformers  to  arrest  by 
injudicious  action  the  tide  of  public  opinion  now  setting  strongly 
in  their  favor,  while  those  in  favor  of  maintaining  substantially 
the  present  system  would  do  well  to  bear  in  mind,  that  by 
resisting  moderate  reforms  at  present,  and  by  continuing  the 
rapid  reduction  of  the  public  debt,  they  cannot  fail  to  ensure 
the  sudden  enactment  of  far  more  radical  measures  in  the  not 
distant  future. 

So  much,  then,  in  the  way  of  exposition  of  the  necessity  of 
prompt  and  large  reductions  in  the  number  and  amount  of 
Federal  taxes.  It  is  proposed  to  next  ask  consideration  to  the 
methods  by  which  an  abatement  of  taxes  may  be  most  safely  and 
judiciously  effected  under  the  tariff — the  department  of  revenue 
in  which  abatements  are  most  urgently  needed. 

The  tariff  of  the  United  States  as  it  now  exists,  and  con- 
sidered entirely  apart  from  any  economic  policy  which  it  may 
be  intended  to  subserve,  is  a  disgrace  to  our  civilization.  The 
honor  of  the  nation,  the  interests  of  ordinary  morality,  the 
necessities  of  business,  and  the  claims  of  civil-service  reform, 
all  alike  demand  that  it  be  reconstructed  with  a  view  to  simpli- 


TARIFF  REVISION.  75 

fication  and  intelligibility.  If  it  be  replied  that  this  is  the  Ian* 
guage  of  a  partisan  and  a  theorist,  we  would  ask,  if  it  is  not  a 
libel  on  good  government,  and  an  outrage,  that  constant  suits 
at  law  and  appeals  to  the  Treasury  on  the  part  of  merchants 
should  be  made  necessary — some  18,000  of  which  are  now 
reported  as  on  file — in  order  to  settle  the  meaning  and  con- 
struction of  the  mere  words  in  which  the  statutes  imposing  the 
rates  of  duty  have  been  expressed?  That,  in  deciding  upon  the 
rates  of  duties  to  be  imposed  upon  certain  fabrics,  the  differ- 
ence of  a  shade  of  blue  or  brown,  or  the  weighing  in  a  damp 
atmosphere,  makes  the  same  quality  of  merchandise  just  enough 
heavier  to  turn  the  scale  and  largely  augment  the  assessment  of 
the  duty;  that  a  constant  espionage  of  the  mails  and  an  exami- 
nation of  the  contents  of  sealed  letters  is  necessary  to  protect 
the  revenue;  and  the  mere  misplacement  of  a  comma,  as  in  the 
case  of  a  former  tariff  enactment  in  respect  to  dried  fruits, 
makes  a  difference  of  hundreds  of  thousands  of  dollars  in  the 
receipts  of  the  Treasury. 

France  has  a  tariff  of  the  kind  needed  in  the  United  States,  if 
its  taxes  are  to  be  imposed  on  many  articles,  embodying  the  pro- 
tective policy  :  extensive,  but  so  scientifically  constructed  as  to  be 
almost  free  from  ambiguity  or  the  possibility  of  misinterpretation. 
The  Walker  tariff  of  1846,  the  best  tariff  in  respect  to  administra- 
tion and  adaptation  to  the  end  designed  which  the  United  States 
has  ever  had,  was  a  model  of  simplicity  and  conciseness.  It 
was  not  an  attempt  to  amend  anything  that  had  previously 
existed,  but  was  an  original  construction,  framed  after  much  pa- 
tient inquiry,  with  the  aid  of  the  best  experts,  and  recognized  the 
ad-valorem  system  exclusively;  all  imports  subject  to  duty  being 
arranged  in  eight  alphabetically  designated  classes,  to  each  one 
of  which  an  ad-valorem  rate  was  assigned,  ranging  from  5  to  100 
per  cent.  To  attempt  to  now  reconstruct  the  tariff  as  a  whole, 
and  make  it  simple  and  harmonious,  we  must,  it  would  seem,  take 
either  the  French  or  the  "  Walker"  system  as  a  model.  To  at- 
tempt to  do  it  on  the  principle  that  has  alone  been  recognized 
since  i860,  namely,  that  of  establishing  a  separate  and  varying 
rate  for  every  article  or  limited  class  of  articles,  and  endeavor- 
ing at  the  same  time  to  balance  the  reciprocal  relations  of  a  mul- 
titude of  industries  and  make  compensation  to  each  for  a  pro- 


76  PRACTICAL    ECONOMICS. 

gressive  and  unequal  taxation  of  its  respective  elements,  is  im- 
possible, simply  because  it  would  demand  superhuman  knowl- 
edge to  do  it.  A  volume  almost  might  be  written  full  of 
incidents  which  would  be  most  amusing  if  they  had  not  been 
often  most  disastrous,  of  influences  unexpected  (even  by  those 
well  acquainted  with  the  subject)  and  most  remote  in  their  effects, 
which  have  been  the  result  of  attempting  to  impose  tariff  taxes 
in  this  country  in  this  manner.  Hence  those  who  know  most  of 
the  tariff  are,  as  a  rule,  the  most  conservative  and  the  least 
inclined  to  advise  radical  and  arbitrary  legislation.  But  what 
chance  is  there  for  a  commission  not  more  than  two  members 
of  which  bring  any  fund  of  previous  knowledge  to  their  work, 
and  whose  attention  has  been  mainly  occupied  with  statements 
submitted,  as  Adam  Smith  once  expressed  it,  "  with  all  the  pas- 
sionate confidence  of  interested  falsehood,"  of  reporting  any 
complete  yet  simple  and  intelligent  system?  As  well  expect  an 
equal  number  of  well-meaning,  moderate  men,  as  the  result  of  six 
months'  desultory  experience,  to  be  able  to  revise  an  intricate 
code  of  civil  or  criminal  law,  to  make  a  geologic  survey,  or  lucidly 
expound  the  best  method  of  managing  a  complicated  competitive 
railroad  system.  Or  supposing,  by  some  gift  of  inspiration, 
they  were  able  to  submit  such  a  report ;  what  chance  would  there 
be  for  its  adoption  by  Congress?  A  single  amendment,  offered 
by  some  member  whose  main  interest  in  the  tariff  was  to  know 
what  some  influential  and  selfish  constituent  desired,  might  prove 
as  destructive  of  all  harmonious  adjustment  and  working  as 
would  the  interposition  of  some  rude  fragment  of  wood  or  metal 
among  the  delicate  wheels  and  levers  of  some  nicely  constructed 
machinery.1 

1  As  an  illustration  of  the  difficulties  unavoidably  connected  with  the  control 
or  direction  of  economic  or  fiscal  legislation  by  men  whose  ideas  of  trade  and 
commerce  have  been  largely  gained  by  an  experience  of  selling  nails  by  the 
pound,  molasses  by  the  quart,  and  tape  by  the  yard,  the  following  story  may  be 
related:  By  the  act  of  June  30th,  1864,  the  duty  on  imported  bituminous  coal  was 
fixed  at  $1.25  per  ton.  By  the  act  of  1873  this  duty  was  reduced  to  75  cents  per 
ton.  A  merchant  of  Boston  interested  in  the  coal-mines  of  Nova  Scotia,  hap- 
pening to  be  in  Washington  shortly  after  the  change  in  the  law,  called  on  a  pro- 
minent member  of  Congress  who  had  been  instrumental  in  effecting  the  reduc- 
tion, with  a  view  of  expressing  thanks  to  the  latter  for  his  action  and  vote.  In 
the  course  of  the  conversation  which  ensued  it  was  incidentally  mentioned  that 


TARIFF  REVISION.  J7 

It  seems,  therefore  evident  that  no  general  reconstruction  of 
the  tariff  is  possible  at  present,  or  even  in  any  not  distant  future  ; 
and  that  no  general  propositions  for  relief  from  the  abatement  of 
excessive  taxation  in  this  department  of  our  revenue  are  likely  to 
be  ever  entertained,  except  for  an  increase  of  the  free  list, 
and  a  recognition  of  the  principle  embodied  in  the  celebrated 
"  Compromise  Tariff  Act"  brought  forward  by  Henry  Clay  in 
1832,  under  political  and  industrial  circumstances  not  unlike 
what  exist  at  present,  and  subsequently  adopted  by  Congress: 
which  provided  in  the  main  for  a  reduction  of  10  per  cent  in  all 
duties  in  excess  of  20  per  cent  at  three  successive  intervals  of 
two  years. 

A  United  States  Senator  from  Massachusetts — Mr.  Hoar — 
has  been  pleased  to  say  of  this  latter  method  "that  there  never 
came  out  of  a  lunatic  asylum  propositions  so  monstrous,  so  in- 
defensible, so  destructive,"  and  that  its  adoption  "  will  be  to 
create  a  business  revolution  not  equalled  "  by  anything  in  our  ex- 
perience.    But  such  assertions  may  be  passed  by  as  the  utter- 

the  Washington  Capitol  building  itself  was  lighted  with  gas  derived  from  the 
very  Nova  Scotia  coal  which  had  been  mainly  affected  and  cheapened  by  the  re- 
duction of  the  duty  in  question.  Some  surprise  being  manifested  by  the  Con- 
gressman that  such  should  be  the  case,  the  merchant  explained  its  happening  in 
this  wise  :  Small  vessels  sailed  in  the  first  instance,  mainly  from  New  England 
to  ports  of  the  British  North  American  Provinces,  laden  with  miscellaneous 
freights — furniture,  hardware,  glass,  coarse  textiles  and  carpets,  drugs,  medicines, 
paper,  machinery,  etc. — the  product  of  our  domestic  industries.  These  shipments 
directly  or  indirectly  paid  for  Nova  Scotia  coal,  especially  adapted  to  the  econo- 
mical manufacture  of  gas,  which  coal  was  then  transported  in  American  bottoms 
to  the  Potomac  and  sold  to  the  Washington  Gas  Company.  A  cargo  being  unload- 
ed, the  vessel  was  immediately  reloaded  with  coal  from  the  Cumberland  mines  of 
Maryland,  especially  desirable  for  black?mithing  or  steam  purposes,  which  coal 
in  turn  was  transported  and  sold  in  the  Boston  market;  and  the  circle  of  ex- 
changes being  thus  completed — each  movement  of  which  brought  profit  to  Amer- 
ican labor  and  capital,  and  enlarged  the  sphere  of  employment  for  our  merchant 
marine — a  new  and  similar  series  of  commercial  transactions  were  at  once  en- 
tered upon  with  the  same  recurring  results.  To  all  this  the  only  reply  which  the 
Congressman  vouchsafed  to  make  was,  "Well,  I  had  no  idea  that  Nova  Scotia 
coal  could  be  used  in  Washington.  Had  I  been  aware  of  it  I  certainly  should 
have  voted  against  the  reduction  of  duty.  I  think  I  made  a  mistake  in  voting 
as  I  did."  And  this  story  is  true,  almost  literatim  et  verbatim,  and  the  Con- 
gressman in  question  still  holds  his  seat  in  the  national  halls  of  legislation  and  is 
never  weary  about  talking  of  the  necessity  of  encouraging  our  domestic  indus- 
tries. 


78  PRACTICAL    ECONOMICS. 

ances  of  an  intellectual  crank  who  has  persuaded  himself  that 
the  continual  taking  of  excessive  portions  of  the  product  of  the 
labor  of  the  masses  under  the  name  of  taxation,  and  using  a 
large  part  of  the  taking  for  extravagant  expenditures,  is  equiva- 
lent to  the  creation  of  wealth.  The  argument  that  successive 
percentage  reductions  of  the  tariff  would  compel  the  manufac- 
turer to  conduct  his  business  for  a  series  of  years  on  a  falling 
market  is  more  rational.  But  if  it  has  any  value  at  all,  it  is  con- 
clusive against  all  reductions  of  taxation.  The  real  objection  to 
the  Clay  "  compromise"  plan  is  that  it  gives  little  or  no  immediate 
relief  from  the  present  burden  of  tariff  taxes,  and  practically  will 
not  reduce  the  revenues.  Its  recommendations  are  that  it  will 
work  no  real  injury  to  any  one,  will  be  in  the  nature  of  a  tenta- 
tive experiment,  and  a  positive  step  in  the  right  direction,  and, 
apart  from  general  action,  in  accordance  with  the  two  plans  above 
mentioned.  The  only  further  method  for  reducing  and  amending 
the  tariff  that  would  seem  to  be  possible  is  that  of  taking  up  and 
considering  its  multiplied  provisions  in  detail,  and  legislating 
separately  in  respect  to  the  numberless  articles  or  classes  of  ar- 
ticles taxed ;  having  reference  in  so  doing  to  two  points :  first, 
the  reduction  of  national  taxation ;  and  second,  of  making  such 
reductions,  severally  and  in  the  aggregate,  instrumentalities  for 
cheapening  the  cost  of  all  domestic  production  and  of  living, 
enlarging  the  market  for  our  manufactured  products,  widening 
the  opportunities  for  the  employment  of  labor,  and  bringing 
back  to  its  former  status  our  now  all  but  extinct  merchant 
(ocean)  marine.  And  in  respect  to  this  latter  point,  Prof.  Sie- 
mens, in  his  recent  address  before  the  British  Association,  tells 
us  that  the  time  is  near  at  hand  when  there  is  to  be  a  revolu- 
tion in  the  construction  and  propulsion  of  ocean  ships  analogous 
to  what  occurred  when  iron  was  substituted  for  wood,  and  steam 
for  sails ;  a  statement  which  may  be  construed  as  saying  to  the 
United  States,  "  You  are  to  be  relieved,  by  the  progress  of  in- 
vention and  discovery,  from  your  present  disabilities  in  respect  to 
equipment  for  prosecuting  the  ocean  carrying  trade,  and  may 
have  an  equal  chance  in  starting  against  all  competitors  under 
the  new  conditions,  if  you  will  only  not  continue  to  neutralize 
the  inventive  skill  and  business  enterprise  of  the  nation  by  the 


TARIFF  REVISION.  79 

creation  and  maintenance  of  artificial  obstructions  in  the  path  of 
progress."  And  with  a  view  of  aiding  in  this  work,  it  is  proposed 
to  next  submit  some  points  that  maybe  worthy  of  consideration 
on  the  part  of  Congress  and  the  public. 


TARIFF  REVISION:  ITS  NECESSITY  AND  POSSIBLE 

METHODS.1 

II. 

IN  a  certain  and  at  the  same  time  correct  sense,  all  loyal  and 
patriotic  citizens  are  ultra-protectionists.  That  is  to  say, 
every  American  with  one  spark  of  patriotism  and  national  loyalty 
in  his  composition  prefers  the  interest  of  his  country  to  that 
of  any  and  every  other  country,  and  is  ever  ready  with  heart 
and  hand  to  support  every  measure  that  tends  to  promote  the 
development  and  prosperity  of  his  country  and  insure  the  maxi- 
mum of  abundance  and  comfort  to  his  fellow-citizens.  But 
altho  thus  united  as  a  whole  people  in  the  desire  for  a  common 
object,  the  greatest  divergence  of  individual  opinion  at  the  same 
time  exists  in  respect  to  the  methods  by  which  such  object  can 
best  be  attained.  On  the  one  hand,  a  large  number  who  espe- 
cially arrogate  to  themselves  the  title  of  protectionists  (to  Amer- 
ican industry)  assume  by  their  action,  if  they  do  not  openly 
proclaim  by  their  speech,  that  national  industrial  development 
can  be  most  speedily  effected  and  permanently  maintained  by 
creating  and  imposing  artificial  obstructions — mainly  in  the 
nature  of  excessive  or  discriminating  taxes — upon  the  work  of 
producing  and  exchanging;  while,  on  the  other  hand,  a  not  in- 
considerable number  of  citizens,  in  view  of  the  great  and  varied 
resources  of  our  country,  the  intelligence  of  its  people,  their 
wonderful  skill  in  the  invention  and  use  of  machinery,  and  their 
readiness  to  adapt  themselves  to  circumstances,  believe  with 
equal  sincerity  that  the  largest  and  truest  protection  to  Amer- 
ican industry  is  to  be  obtained  through  the  removal  to  the 
greatest  possible  extent  of  taxes  and  obstructions  of  every  kind 
on  the  work  of  producing  and  exchanging ;  and  that  such  pro- 

1  Princeton  Review. 
80 


TARIFF  REVISION.  8 1 

tection,  if  attainable,  is  certain  to  be  most  stable,  because  it  will 
be  most  simple  and  natural.  It  is  rather  difficult  to  assign  any 
good  reason  why  those  who  accept  the  former  of  these  opinions 
should  be  always  so  ready  and  so  uncharitable  as  to  impute  im- 
proper motives  and  eminent  lack  of  patriotism  to  those  who 
believe  in  the  latter.  But  be  this  as  it  may,  it  must  be  admitted 
that  the  present  necessity  for  making  large  reductions  in  national 
taxation,  for  reasons  independent  of  any  theoretical  considera- 
tions, affords  a  most  excellent  opportunity  for  safely  determin- 
ing by  practical  experiments  which  of  the  two  methods  of  pro- 
tection referred  to  is  likely  to  prove  most  effective ;  and  with  a 
view  of  helping  to  such  determination  and  assuming,  in  accord- 
ance with  the  deductions  of  a  former  article,  that  the  immediate 
work  by  Congress  of  abolishing  tariff  taxation  will  be  mainly 
confined  to  legislation  in  respect  to  certain  specific  taxes,  it  is 
proposed  to  next  ask  attention  to  a  review  of  the  condition  of 
some  of  our  great  branches  of  industry,  and  of  the  requirements 
essential  to  give  them  a  further  healthy  growth  or  extension; 
the  first  example  selected  being  that  of  the  Manufacture  of 
Cotton. 

This  industry  ranks  third  or  fourth  in  importance  among  the 
manufacturing  industries  of  the  country.  It  has  been  long  es- 
tablished, enjoys  special  advantages  in  the  supply  and  cost  of 
its  raw  material,  and  produced  goods  in  1880  to  the  value  of 
$192,773,000.  In  1879  a  representative  of  The  British  Textile 
Manufacturer  (a  trade  journal  of  established  authority),  thor- 
oughly qualified  for  his  task,  visited  the  United  States  for  the 
purpose  of  ascertaining  through  extensive  personal  investiga- 
tions what  the  British  cotton  manufacturers  had  to  fear  from 
American  competition  in  the  world's  markets.  He  reported  to 
his  employers  in  December,  1879/  "that  in  the  matter  of  wages 
America  is  as  cheap  as  England."     (The  census  returns  show 


1  It  is  somewhat  curious  that  this  report,  which  was  not  private  and  is  one  of 
the  most  interesting  of  recent  economic  publications,  seems  to  have  wholly 
escaped  the  attention  of  the  multitude  of  writers  and  speakers,  in  Congress  and 
out,  who  have  discussed  the  question  of  the  relative  wages  of  the  United  States 
and  Europe.  It  was,  moreover,  not  even  alluded  to  in  the  recent  report  on 
wages  issued  by  the  Treasury  and  State  Departments,  in  response  to  a  call  by 
Congress  for  information  on  this  subject. 


82  PRACTICAL    ECONOMICS. 

that  the  average  wages  paid  to  the  hands  employed  in  the  cot- 
ton manufactures  of  the  United  States  for  1880  were  $245.47 
per  annum.  The  best  available  statistics  for  the  United  King- 
dom for  1882  make  the  annual  average  for  British  cotton-spinners 
and  weavers  a  trifle  over  $250.  See  also  U.  S.  Consular  Reports 
for  1882,  to  the  same  effect.)  The  average  relative  cost  per  pound 
of  manufacturing  print  cloths  was  returned,  with  full  data  for 
verification,  at  11.99  cents  for  Rhode  Island,  12.16  for  England, 
13.72  for  Lowell,  and  15.59  for  Pennsylvania.  It  is  also  most 
interesting  to  note,  in  connection  with  this  matter,  that  while 
this  English  reporter  shows  the  cost  of  cotton  manufacture 
(print  cloths)  to  be  less  in  New  England  than  in  Pennsylvania, 
the  U.  S.  census  for  1880  shows  that  the  general  average  wages 
paid  in  the  cotton-mills  of  New  England  is  about  seven  per  cent 
higher  than  the  general  average  paid  for  similar  service  in  the 
whole  country.  In  the,  matter  of  weaving,  in  which  department 
the  wages  paid  "amount  to  as  much  if  not  more  than  all  other 
processes  combined,"  the  rates  in  England  were  found  to  aver- 
age from  22  to  25  per  cent  more  than  in  the  United  States ; 
but  as  the  American  weaver  (working  by  the  piece)  attends  to 
more  looms  and  turns  out  more  work  per  week  than  his  Eng- 
lish competitor,  the  average  earnings  of  the  former  are  much 
higher  than  the  latter:  thus  illustrating  the  economic  principle 
that  is  now  beginning  to  be  recognized,  that  where  machinery  is 
employed  to  any  great  extent  in  the  work  of  production,  high 
rates  of  wages  and  low  cost  of  production  are  correlative  results. 
The  advantages  enjoyed  by  American  over  English  spinners 
were  further  reported  to  be  "  that  people  in  America  work 
longer"  (on  an  average,  66  hours  per  week,  or  within  a  fraction 
of  an  entire  working  day  each  week  more  than  is  allowed  by 
law  in  Great  Britain) ;  attend  to  their  work  better ;  drink  less ; 
are  less  influenced  by  trade-unions ;  and  have  the  necessaries  of 
life  cheaper.  In  the  matter  of  raw  material  the  English  expert 
showed  that  American  cotton  manufacturers  have  a  decided  ad- 
vantage over  the  English  to  the  extent  of  0.7  cents  or  f  d.  per 
pound.  American  experts  fix  this  advantage  on  our  coarser 
cotton  fabrics  at  "  not  less  than  one  half  cent  and  oftener  three 
fourths  of  a  cent  a  pound  ;"  which  in  turn  is  said  to  represent 
an  ability  on  the  part  of  the  manufacturer  to  pay  at  least  20  per 


TARIFF  REVISION.  83 

cent  higher  wages,  and  yet  produce  a  given  kind  of  cloth  at  an 
equal  cost  with  English  competitors.  It  is  also  asserted  by  ex- 
perts that  the  question  as  to  what  cotton  manufacturers  shall 
supply  the  bulk  of  the  world's  consumption  is  likely  to  turn  on 
as  small  a  margin  as  an  eighth  of  a  cent  a  yard.  Under  these 
circumstances  the  United  States  has  long  ceased  to  import 
the  goods  necessary  to  meet  the  wants  of  the  million,  but  does 
import  very  largely  of  such  finer  cotton  fabrics  as  depend  mainly 
on  style  and  fashion  for  their  use ;  the  value  of  the  total  impor- 
tations for  the  fiscal  year  1881-2  being  $34,351,000,  an  increase 
over  the  previous  year  of  about  ten  per  cent.  Of  these  imports, 
$7,501,000  represented  hosiery,  shirts,  and  drawers;  $2,257,000 
jeans  and  drillings;  and  $22,164,000  goods  not  specially  enume- 
rated, mainly  fine  fabrics  and  fancy  articles.  On  the  other 
hand,  in  the  matter  of  supplying  foreign  countries  we  do  not 
transact  as  large  a  business  as  we  did  twenty-two  years  ago. 
The  United  States  has  never  exported  as  much  as  150,000,000 
yards  in  any  one  year ;  while  Great  Britain  exports  year  in 
and  year  out  nearly  five  thousand  millions  of  yards,  or  its 
equivalent.  In  1880  we  exported  raw  cotton  to  all  countries  to 
the  value  of  $239,000,000,  and  thought  we  did  a  big  business ; 
but  during  the  same  year  Great  Britain,  besides  supplying  her 
own  domestic  consumption  and  with  a  general  depression  of  her 
industries,  exported  manufactures  of  cotton  to  the  value  of 
$377,000,000.  In  the  business  of  making  cotton  goods  for  ex- 
port, altho,  in  addition  to  other  advantages,  we  are  by  natural 
location  a  cheaper  distributing  centre  than  England  for  a  large 
part  of  the  world's  consumption,  we  may  be  said  to  have  as  yet 
but  barely  scratched  the  ground.  Now  what  more  important 
matter  could  claim  the  attention  of  Congress  and  the  country 
than  the  ascertainment  of  the  reason  of  this  remarkable  indus- 
trial condition  of  affairs?  What  better  starting-point  of  inquiry 
for  a  national  commission  authorized  to  investigate  the  relations 
of  the  tariff  to  the  varied  business  interests  of  the  country?  In 
most  other  countries  this  matter  would  be  considered  of  suffi- 
cient magnitude  to  warrant  the  creation  of  a  commission  for  its 
special  investigation  and  nothing  else.  New  England  ought  to 
take  the  greatest  interest  in  having  such  an  investigation ;  for 
just  as  bright,  sharp  Yankees,  just  as  skilled  in  the  construction 


84  PRACTICAL   ECONOMICS. 

and  use  of  machinery,  are  now  scattered  all  over  the  West,  the 
South,  and  the  Pacific  States,  as  still  live  within  her  borders ; 
and  these  men,  prompted  by  self-interest,  have  constantly  the 
objective  before  them  of  emancipating  their  own  sections  from 
dependence  on  New  England  for  supplies  of  manufactured  pro- 
ducts. And  if  current  reports  are  to  be  accepted,  the  day  is 
close  at  hand  when  the  South  will  seriously  break  in  upon  New 
England's  present  prerogative  of  supplying  the  bulk  of  the 
domestic  consumption  of  coarse  cotton  fabrics,  and  compel 
the  latter,  if  she  would  continue  her  industrial  growth  or  even 
maintain  her  present  status  in  this  department  of  production,  to 
seek  for  other  and  larger  markets  than  she  now  enjoys.  Could 
the  United  States  participate  in  the  existing  cotton-fabric  ex- 
port of  Great  Britain  to  the  extent  of  only  one  third,  we  could 
at  once  greatly  increase  the  number  of  our  spindles,  give  em- 
ployment to  at  least  one  hundred  thousand  additional  opera- 
tives, plant  factories  beside  many  a  now  unutilized  water-power  or 
coal-mine,  and  render  much  substantial  help  in  the  way  of  resus- 
citating our  commercial  (ocean)  marine.  Experts  tell  us,  more- 
over, that  there  are  from  five  to  eight  hundreds  of  millions  of 
people  outside  of  Europe  and  the  United  States  who  are  clothed 
mainly  in  cotton  manufactured  by  slow  and  toilsome  hand  pro- 
cesses. One  skilled  female  operative  in  a  first-class  American 
factory  can  produce  more  and  better  cloth  in  one  day  than  the 
most  skilled  of  these  hand-loom  workers  can  in  fifteen  or  twenty 
days.  Could  we  reach  one  half  of  these  consumers  we  should 
need  forty  million  spindles  in  addition  to  our  present  eleven 
millions,  and  600,000  operatives  more  than  our  present  185,000. 
Under  such  circumstances  what  folly  it  is  to  talk  about  relative 
wages;  as  if  any  hand  product  of  even  the  poorest  paid  labor  of 
China  or  India  could  compete  with  our  machinery  :  and  of  what 
importance  it  is  that  we  should  study  and  arrange  our  system 
and  our  instrumentalities  for  foreign  commerce,  so  that  the 
pauper  labor  of  other  countries  could  be  induced  to  give  us 
something  satisfactory  in  exchange  for  the  products  of  our 
machinery;  and  how  much  longer  are  we  as  a  nation,  in  obe- 
dience to  "wrong  end  foremost"  notions  of  protection,  to  let 
this  enriching  opportunity  of  exchanging  with  "  foreign  paupers" 
slip  out  of  our  hands? 


TARIFF  REVISION.  8$ 

The  result  of  such  an  inquiry  would  probably  be  in  accordance 
with  the  conclusions  at  which  most  American  investigators  have 
for  some  time  arrived  ;  namely,  that  the  tariff  has  ceased  to 
be  a  factor  of  the  slightest  importance  in  determining  the  source 
of  supply  of  the  great  bulk  of  the  cotton  fabrics  required  for  the 
domestic  consumption  of  this  country,  and  that  American  manu- 
facturers would  fully  control  this  supply  were  every  tariff  enact- 
ment at  once  swept  from  our  statute-books;  but  that,  on  the 
other  hand,  the  existing  tariff  and  our  navigation  laws  con- 
stitute an  almost  insuperable  obstruction  to  the  command 
by  the  same  manufacturers  of  any  other  than  the  domestic 
market.  The  opinions  of  the  English  expert  on  this  point,  as 
expressed  in  the  report  to  which  reference  has  been  made, 
were  as  follows:  "The  general  impression  made  upon  me,"  he 
says,  "  by  what  I  saw  of  cotton  manufacturing  in  the  United 
States  is  that  at  present  England  has  little  to  fear  from  its 
rivalry,  but  that  it  lies  in  the  hands  of  the  people  of  America  to 
make  a  considerable  change  in  the  state  of  things,  whenever 
they  think  proper.  While,  however,  the  American  nation  heaps 
duties  upon  the  import  of  foreign  machinery,  thus  increasing 
the  cost  of  mill  construction,  and  in  other  ways  by  her  tariff 
arrangements  artificially  raising  the  cost  of  production,  Ameri- 
can manufactures  will  continue  too  high  in  price  to  compete 
with  English  goods  in  all  but  exceptional  instances.  America 
is  a  world  in  itself,  and  she  would  continue  to  prosper,  tho 
in  a  less  degree,  if  the  old  world  disappeared.  So  long  as  her 
population  increases  in  as  great  a  proportion  as  her  manufac- 
tures, so  long  will  her  manufacturing  industries  flourish  ;  but  the 
time  will  come  when  her  factories  will  turn  out  more  clothing 
material  than  the  Americans  can  wear.  She  will  then  feel  her 
isolation."  These  conclusions  must  commend  themselves  to 
every  impartial  reader  as  true.  But  it  would,  nevertheless,  be  a 
most  profitable  thing  if  a  national  commission,  fully  command- 
ing the  confidence  of  the  country,  could  thoroughly  investigate 
this  problem  in  all  its  details,  and  report. 

Relation  of  the  Iron  and  Steel  Industries  to  the  Tariff. — As  the 
domestic  manufacturers  of  iron  and  steel,  at  least  of  the  primary 
forms  of  these  articles,  always  have  been,  and  now  are,  a  most 
potential  element   in  determining  the  nature  of  the  tariff  of 


86  PRACTICAL    ECONOMICS. 

the  United  States,  it  will  be  interesting  and  perhaps  profit- 
able to  ask  the  attention  of  the  public  to  a  line  of  fact  and  rea- 
soning in  the  interests  of  those  who  use  iron  and  steel  as  the 
raw  materials  of  their  industry,  and  of  the  ultimate  consumers 
of  these  articles,  who  outnumber  the  primary  workers  in  the 
ratio  of  thousands  to  one. 

And  first  it  is  to  be  noted  that  the  system  of  protection 
— meaning  thereby  the  imposition  of  a  duty  upon  a  foreign  pro- 
duct with  a  view  of  making  it  for  a  time  more  costly,  and  so 
promoting  or  sustaining  the  business  of  making  such  product 
within  the  limits  of  the  United  States — has  ceased  to  protect 
American  labor  in  the  iron-mines,  iron  and  steel  works,  and  roll- 
ing-mills of  this  country,  if  in  truth  it  ever  did  so.  In  proof  of 
this  assertion,  which  to  many  will  seem  utterly  audacious  and 
unwarranted,  it  may  be  stated  that  the  census  reports  recently 
made  by  Prof.  Pumpelly  in  respect  to  iron-mining,  disclose  the 
fact  that  there  were  in  the  census  year  1880,  31,668  persons  en- 
gaged in  this  branch  of  American  industry,  to  whom  aggregate 
annual  wages  were  paid  of  $9,538,1 17.  It  further  appears,  from 
the  census  investigations  made  by  Mr.  James  M.  Swank,  that 
there  were  also  employed  during  the  year  1880  in  all  the  iron 
and  steel  works  of  the  United  States,  in  converting  ore  into 
pigs,  bars,  plates,  ingots,  and  rails,  140,978  persons,  whose  annual 
wages  amounted  to  $55,476,785.  The  whole  number  of  persons 
employed  in  these  two  departments  of  our  iron  and  steel  indus- 
tries was  therefore  172,646,  and  the  sum  of  all  the  wages  paid 
them  during  the  census  year  was  $65,014,902.  Assuming  the 
force — made  up  mainly  of  adult  men — to  be  employed  three 
hundred  days  in  the  year,  their  average  earnings  in  the  census 
year,  which  was  a  year  of  great  prosperity  in  the  iron  and  steel 
industries,  amounted  to  $375  for  each  workman,  or  almost  ex- 
actly $1.25  per  day ;  a  rate  which  every  one  knows  is  only  a  fair 
average  for  the  most  ordinary  labor  in  other  employments,  and 
is  much  less  than  is  paid  on  the  average  to  workmen  in  machine- 
shops  and  other  branches  of  industry  in  which  iron  and  steel 
constitute  a  large  part  of  the  raw  material.  (The  average  wages 
for  the  most  common  labor  in  1874  [see  Young's  "Labor  and 
Wages,"  pp.  739,  743]  were  $1.53  per  day  in  New  York,  $1.58  in 
Illinois,  $1.75  in  Michigan,  $1.50  in  Missouri.     For  experienced 


TARIFF  REVISION.  87 

farm-labor  the  average  per  diem  in  the  Western  States  ranged 
from  $1.48  in  Ohio  to  $175  in  Michigan.)  It  is  therefore  a 
matter  of  absolute  demonstration  that  "  protection  did  not  pro- 
tect" the  laborer  in  these  departments  (iron  and  steel)  of  our  do- 
mestic industry  during  the  census  year;  and  further,  that  it  is  no 
advantage  for  him  to  be  encouraged  to  remain  in  this  kind  of 
work,  and  for  the  sufficient  reason  that  he  can  earn  as  high  or 
higher  wages  in  other  employments  of  a  more  desirable  and 
attractive  kind.  That  there  would  be  no  difficulty  in  finding 
other  employments,  perhaps  of  a  better  kind  (all  things  consid- 
ered), than  this  work  for  this  whole  force  of  laborers  in  question, 
would  seem  to  be  proved  by  the  circumstance  that  their  aggre- 
gate number  is  less  than  one  fifth  of  the  number  of  immigrants 
who  landed  on  our  shores  during  the  past  year, — all  of  whom, 
certainly  all  of  the  more  enterprising,  appear  to  have  speedily 
found  employment ;  and  it  is  probable  that  their  average  daily 
wages  were  not  less  than  $1.25  per  day. 

Second.  The  work  of  the  laborers  in  the  iron  mills  and  works 
of  the  United  States  during  1880  resulted  in  the  production  of 
3,781,021  tons  of  pig  metal,  and  its  conversion,  when  mixed  with 
foreign  ore  and  domestic  pig,  into  a  proportionate  quantity  of 
finished  bars,  plates,  ingots,  and  rails.  For  the  year  1881  the 
American  Iron  and  Steel  Association  reports  that  the  product 
of  pig-iron  increased  twenty-three  per  cent,  or  to  a  total  of 
4,641,564  tons  ;  and  it  is  well  known  that  this  increased  quantity 
was  not  sufficient  to  meet  the  demands  for  domestic  or  home 
consumption,  and  that  large  amounts  of  iron-ore  and  of  iron  and 
steel  ingots,  bars,  and  rails  were  imported  from  foreign  countries. 

TJiird.  The  American  iron  and  steel  manufacturers  (the  manu- 
facturers of  Bessemer  steel  excepted)  almost  unanimously  and 
constantly  represent  that  the  manufacture  of  common  iron — pigs, 
bars,  and  rails — has  not  been  unusually  profitable,  or  not  more  so 
than  other  branches  of  industry.  On  this  point  the  American  pub- 
lic have  no  direct  and  certain  knowledge  ;  but  it  is  not  to  be  pre- 
sumed that  the  iron-masters  have  put  forth  intentionally  false 
statements.  If,  then,  the  average  rate  of  earnings  of  the  workmen 
in  these  departments  of  our  domestic  industry  have  only  been 
equal  to  those  of  the  most  common  labor  outside  the  mines,  the 
furnaces,  and  the  mills;  and  if  it  be  also  true,  as  the  iron-masters 


88  PRACTICAL    ECONOMICS. 

themselves  allege,  that  there  has  been  no  realization  of  profits 
above  the  average  in  their  business,  it  clearly  follows  that  pro- 
tection has  ceased  to  protect  either  labor  or  capital  in  the  in- 
dustry under  consideration,  however  it  may  have  been  in  times 
past.  And  this  being  admitted,  the  conclusion  is  warranted  that 
the  excess  of  price,  in  consequence  of  protective  duties,  which 
the  consumers  of  the  United  States  have  paid  for  iron  and  steel 
bars  and  rails  over  and  above  their  competitors  in  other  coun- 
tries has  been  so  much  lost  to  the  people  of  this  country,  either 
in  useless  transportation  of  ore  and  coal  to  furnaces  which  are 
misplaced,  or  in  useless  royalties  to  the  owners  of  mining  lands ; 
or  else  the  iron-masters  of  the  United  States  are  at  this  late 
period  still  representatives  of  an  infant  manufacture,  which  they 
are  incapable  of  conducting  for  want  of  knowledge,  and  in 
which  they  ask  to  be  sustained  at  public  expense.  The  above 
general  remarks  as  to  profits  may  not,  and  probably  do  not, 
apply  to  very  many  iron  and  steel  works  that  are  well  situated, 
especially  to  such  as  are  west  and  south  of  the  Alleghanies ;  for 
the  testimony  is  conclusive  that  pig-iron  has  been  made  at  many 
places  in  these  localities  at  a  cost — including  all  charges  for  royal- 
ties, for  ore,  for  coal,  for  depreciation  and  wages — ranging  from 
$12  to  $15  per  ton,  and  even  less.  One  iron-master  who  recently 
appeared  before  the  Tariff  Commission  at  Nashville  (Col.  Shook) 
testified  that  the  cost  of  the  manufacture  of  pig-iron  in  Ten- 
nessee was  $15  per  ton.  Near  Birmingham,  Alabama,  the  cost 
is  represented  as  between  $12  and  $13;  and  at  Chattanooga  as 
between  $11  and  $12.  Now  such  works  as  these,  it  must  be 
apparent,  cannot  be  protected  and  need  no  protection  of  any 
tariff  of  duties  against  foreign  competitors ;  and  simply  for  the 
reason  that  they  enjoy  so  large  a  measure  of  protection  in  their 
distance  from  the  sources  of  supply  of  British  iron  as  to  be 
entirely  independent  of  all  artificial  encouragements.  It  some- 
times occurs  that  iron  is  brought  across  the  Atlantic  at  a 
nominal  charge,  but  it  may  be  assumed  that  the  cost  of  bring- 
ing iron  from  the  works  of  England  and  Scotland  to  the 
Atlantic  ports  of  the  United  States  is,  on  the  average,  about  one 
pound  sterling,  or  $5,  per  ton.  Thence  to  further  transport  it 
either  to  the  iron  centre  of  Ohio  or  to  Alabama  will  cost  at  least 
half  a  cent  a  ton  per  mile,  or  $3.50 ;  and  much  more  to  the 


TARIFF  REVISION,  89 

neighborhood  of  the  iron-works  of  Missouri.  In  other  words, 
the  protection  of  distance  which  the  iron  mines  and  works  west 
and  south  of  the  Alleghanies  now  enjoy  is  greater  than  the 
entire  sum  of  wages  paid  for  making  pig-iron  in  these  works.  In 
fact,  the  cost  of  bringing  the  iron  produced  in  the  United 
States  during  the  census  year  1880  from  Great  Britain  to  the 
centre  of  population  of  the  United  States  would  have  been  at 
least  $8.50  per  ton,  and  at  this  rate  would  have  amounted  to 
more  than  one  half  the  entire  sum  of  the  wages  paid  in  all  the 
iron-mines  and  iron  and  steel  works  of  the  United  States  for 
that  year.  In  view,  then,  of  this  demonstrated  failure  of  the 
attempt  to  protect  either  labor  or  capital  in  the  iron-mines  and 
iron-works  of  the  United  States  by  means  of  the  imposition  of 
heavy  tariff  taxes  upon  foreign  imports  of  iron  and  steel,  and 
the  consequent  large  increase  in  the  cost  of  such  products,  is  it 
not  clearly  for  our  national  advantage  to  entirely  remove  all 
such  taxes  in  order  that  the  people  of  the  country  may  hence' 
forth  be  able  to  purchase  iron  and  steel  at  prices  which  shall  not 
be  relatively  much  higher  than  the  prices  which  are  paid  by  our 
industrial  competitors  in  other  countries  ;  such  taxes,  further- 
more, being  no  longer  needed  for  the  purpose  of  insuring  rev- 
enue? It  is  not  to  be  denied  that  the  prices  of  iron  and  steel, 
especially  the  prices  of  Bessemer  steel,  have  been  greatly  re- 
duced in  this  country  within  a  comparatively  recent  period.  But 
the  same  reductions  have  taken  place  in  other  countries,  and  in 
even  greater  measure  ;  and  it  should  not  be  overlooked  that  it 
is  the  prices  which  we  pay  at  any  given  time  for  the  materials 
which  we  use  in  our  manufacturing  industries  which  is  of  prime 
importance  to  us  in  considering  what  are  to  be  our  relations  to 
the  commerce  and  markets  of  the  world, — which  prices  may  be 
lower  than  they  were  ten,  fifteen,  or  twenty  years  ago,  both  here 
and  elsewhere,  and  yet  be  relatively  much  higher  here  than  in 
any  other  countries.  And  of  one  other  thing  we  may  certainly 
feel  assured,  and  that  is  if  we,  by  our  fiscal  policy  and  taxes, 
keep  up  the  prices  of  our  raw  materials,  especially  iron  and  steel, 
so  that  they  continue  to  be  relatively  higher  than  the  prices 
prevailing  in  other  countries,  we  must  abandon  all  hope  of 
supplying  the  world  to  any  great  extent  with  the  products  of 
our  labor,  and  the  demand  for  the  products  of  our  industries 


90  PRACTICAL    ECONOMICS. 

will,  as  now,  continue  to  be  limited  to  the  relatively  small  area 
of  our  territory. 

In  the  above  review  the  manufacture  of  Bessemer  steel  has 
been  excepted.  But  the  following  is  what  an  analysis  of  the 
census  returns  of  1880  tell  us  respecting  the  relations  of  the 
tariff  to  wages  and  product  in  this  industry :  Value  of  product 
(Bessemer  and  "open-hearth  steer*),  $55,805,210;  tons  of  all 
kinds  produced,  983,039;  hands  employed,  10,835;  aggregate 
wages  paid,  $4,930,349.  A  little  application  of  arithmetic  will 
now  show  that  the  ratio  of  wages  to  returned  value  of  product 
was  only  9  per  cent ;  and  that  the  amount  directly  paid  out  in 
wages  was  but  a  trifle  in  excess  of  $5  per  ton.  And  yet,  mainly 
on  the  score  of  protecting  labor,  a  tariff  tax  is  imposed  on  the 
import  of  Bessemer-steel  rails  of  $28  per  ton. 

So  much  for  the  present  relations  of  the  iron  and  steel  in- 
dustries of  the  United  States  to  the  existing  tariff.  It  is  pro- 
posed next  to  take  a  "  look  ahead  "  and  endeavor  to  forecast 
what  would  happen  if  all  the  tariff  taxes  which  now  obstruct 
the  importation  of  iron  and  steel  from  Great  Britain  into  the 
United  States  were  at  once  entirely  removed  ;  a  proceeding 
which  most  people  in  the  United  States  would  probably  regard 
as  in  the  nature  of  an  unmitigated  national  calamity.  The 
present  production  of  pig-iron  in  the  United  States  is  now 
nearly  five  millions  of  tons  (4,641,000  tons  in  1881),  and  in  Great 
Britain  (our  chief  competitor  in  supplying  the  commerce  of  the 
world)"a  little  more  than  eight  millions  of  tons  (8,377,000  in  1881). 
The  immediate  effect  of  a  removal  of  our  tariff  taxes  on  iron 
and  steel  imports  would  be  a  very  heavy  demand  upon  the  iron- 
mines  and  iron-works  of  Great  Britain  for  a  large  additional 
supply.  (The  American  market  at  present  absorbs  about  30  per 
cent  of  the  English,  Belgian,  and  German  export  of  iron  ;  and 
of  all  the  iron-producing  countries  of  Europe  the  net  export  of 
none,  with  the  exception  of  Great  Britain,  is  very  considerable. 
The  production  of  pig-iron  for  the  United  Kingdom  is  reported 
by  the  "  British  Iron  Trade  Association,"  for  the  half  year  end- 
ing June  30,  1882,  at  4,241,245  tons,  and  the  consumption  for 
the  same  time  at  4,339,392,  which  was  496,271  tons  in  excess  of 
the  consumption  for  the  corresponding  period  of  1881.  The 
stock  of  pig-iron  on  hand  in  Great  Britain  on  the  30th  of  June, 


TARIFF  REVISION.  9 1 

1882,  was  also  reported  as  nearly  100,000  tons  less  than  on  the 
30th  of  December,  1881.)  If  we  could  only  maintain  our 
product  where  it  is  (which  we  probably  could  in  virtue  of 
natural  protection),  without  increasing  it,  and  call  upon  Great 
Britain  to  supply  the  increase  which  we  should  need,  year  in 
and  year  out,  over  and  above  our  present  consumption — a 
consumption,  which  prices  made  relatively,  if  not  absolutely 
cheaper,  would  inevitably  increase — it  would  be  impossible  for 
the  iron-mines  and  iron-works  of  Great  Britain  to  respond  to 
such  a  demand  without  instantly  occasioning  an  effect ;  first, 
upon  the  prices  of  British  iron  in  the  state  of  pig,  bar,  and  rail ; 
second,  upon  the  wages  of  those  who  work  the  British  mines,  fur- 
naces, and  rolling-mills;  and  third,  upon  the  demand  of  Great 
Britain  on  this  country  for  agricultural  products,  inasmuch  as 
the  iron-workers  of  Great  Britain  are  even  now  as  largely  fed 
from  the  products  of  the  prairies  of  the  West  as  are  the  iron 
miners  and  workers  of  the  United  States:  and  in  the  case  of 
Pennsylvania  to  an  even  greater  extent,  as  the  capacity  of  this 
latter  State  to  feed  her  own  working-people  is  much  greater  than 
the  capacity  of  the  iron  districts  of  Great  Britain  in  a  like 
respect.  Then  in  place  of  an  artificial  protection  (uncertain  in 
its  bearing  and  effect),  such  as  it  is  claimed  that  the  laborers  in 
the  iron-mines  and  iron-works  of  this  country  now  enjoy  through 
our  tariff,  a  natural  protection  would  be  established  for  them 
through  the  augmentation  of  the  wages  or  earnings  of  their 
fellow-laborers  abroad,  without  decreasing  their  own  ;  for  it 
would  be  obviously  impossible  to  diminish  the  wages  which  the 
American  iron  miners  and  workers  now  receive  below  the  level 
of  common  labor  outside  of  the  works  in  which  they  are  em- 
ployed— which  wages,  as  before  shown,  average  only  $1.25  per 
day,  or  less  than  the  average  wages  which  the  farmers  of  the 
West  pay  the  labor  which  successfully  competes  through  its 
products  with  the  poorest-paid  labor  of  Europe  and  the  world. 
Furthermore,  when  this  additional  demand  had  thus  raised  the 
prices  of  iron  in  Great  Britain  and  increased  the  wages  or  earn- 
ings of  the  English  operatives,  the  cost  of  iron  to  English  con- 
sumers would  be  much  greater  and  the  relative  advantages  which 
the  persons  who  use  iron  in  Great  Britain — the  builders  of 
machinery,  steamships,  etc. — now  enjoy,  would  be  done  away. 


Of   Till 

rTJ5lVX. 


92  PRACTICAL    ECONOMICS. 

The  use  of  iron  in  this  country  would  greatly  and  rapidly  in- 
crease ;  we  should  at  once  realize  and  enjoy  the  enormous 
natural  advantages  which  we  possess,  growing  out  of  the  cir- 
cumstance that  our  iron  and  coal  mines  are  much  more  easily 
worked  and  at  a  cost  of  much  less  labor,  measured  by  day's  or 
hour's  work,  than  the  English  mines  can  possibly  be ;  and 
through  the  speedy  attainment  of  larger  markets  we  should  for 
the  first  time  turn  to  full  practical  account  our  acknowledged 
skill  in  using  iron  and  converting  it  into  machinery,  hardware, 
agricultural  tools  and  implements,  and  a  vast  variety  of  other 
metal  products  which  the  world  demands  and  in  which  supply 
we  yet  have  as  a  nation  so  very  little  share.  Then  would  follow  a 
transfer  of  the  control  of  the  iron  markets  of  the  world  from 
Great  Britain  to  the  United  States;  and  the  transfer  of  the 
control  in  the  working  of  this  imperial  metal  implies  supremacy 
in  the  world's  commerce  and  an  industrial  aggrandizement'of  the 
nation  that  the  most  enthusiastic  of  American  orators  have  as 
yet  scarcely  dreamed  of.  And  furthermore,  if  in  the  readjust- 
ment of  duties  as  proposed,  any  laborers  engaged  in  the  primary 
production  of  iron  and  steel  should  temporarily  find  themselves 
displaced  from  employment,  and  should  prefer  a  continuance  of 
the  same  kincl  of  work,  the  ranks  of  those  who  are  the  users  of 
iron  and  steel  as  raw  materials  will  be  readily  opened  to  receive 
them ;  inasmuch  as  the  number  of  the  latter,  already  far  in 
excess  of  the  former,  will  not  only  all  be  wanted,  but  will  also 
be  largely  increased  as  soon  as  a  full  and  unobstructed  supply 
of  the  raw  material  of  their  industry  is  assured  to  them.1 

1  The  circumstance  that  the  present  (December,  1882)  capacity  of  the  furnaces 
and  rolling-mills  of  the  United  States  for  producing  iron  and  steel  in  their  primary 
forms  is  probably  largely  in  excess  of  the  present  ability  of  the  country  to  con- 
sume, and  that  trade  in  Pittsburgh  and  the  great  iron  centres  "is  gloomy  and  dis- 
appointing," is  no  argument  against  the  policy  here  advocated  of  removing  all 
duties  from  the  importation  of  iron  and  steel,  but  rather  an  argument  of  great 
weight  in  its  favor.  Thus,  the  revival  of  business  in  1878  and  the  subsequent 
large  extension  of  our  railroad  system  created  a  large  demand  for  iron  and  steel; 
and  the  free  supply  of  these  articles  being  obstructed  by  tariff, their  prices  greatly  and 
abnormally  advanced,  thereby  excessively  and  unnecessarily  taxing  all  the  other 
industries  of  the  country:  Bessemer-steel  rails,  for  example,  rising  from  $42  per 
ton  in  February.  1879,  to  $85  per  ton  in  February,  1880,  and  pig-iron  from  an 
average  of  $i7f  per  ton  in  1878  to  $28^  per  ton  in  1880.  The  realization  and 
prospect  of  excessive  profits  next  stimulated  an  unhealthy  increase  in  the  "  plant" 
or  instrumentalities  for  production;  and  as  production  has  gone  on,  supplies  have 


TARIFF  REVISION.  93 

Is  the  picture  thus  presented  overdrawn  ?  The  majority,  not 
yet  sufficiently  educated  to  appreciate  our  capacity  and  readi- 
ness as  a  nation  for  industrial  independence,  and  the  strength 
and  development  which  will  inevitably  attend  and  follow  the 
emancipation  of  our  industries  from  taxes  and  obstructions,  will 
doubtless  answer  in  the  affirmative.  But  be  this  as  it  may, 
those  who  indulge  in  such  forecastings  of  our  possible  industrial 
future,  to  be  attained  through  a  revision  of  our  national  fiscal 
policy,  are  surely  not  justly  liable  to  the  accusation  of  being 
the  representatives  of  foreign  interests,  altho  they  may  be 
to  that  of  being  enthusiasts.  On  the  other  hand,  consider  some 
points  of  a  reverse  picture. 

The  representatives  of  the  iron-ore-mining  interests  in  the 
United  States  have  recently  agreed  to  ask. of  Congress  an  in- 
crease in  the  duties  imposed  on  the  importation  of  foreign  ores. 
Per  contra,  the  domestic  manufacturers  of  iron  assert  that  the 
use  of  the  foreign  in  conjunction  with  the  American  ores  of 
iron  is  of  the  highest  importance,  inasmuch  as  the  admixture 
improves  the  quality  of  the  resulting  product,  obviates  a  neces- 
sity of  importing  the  foreign  ores  worked  up  into  higher  forms, 

rapidly  increased,  until,  with  the  first  check  in  business  activity,  they  have  become 
in  excess  of  demand:  all  of  which  has  induced  in  turn  such  a  severe  competition 
and  reduction  of  prices  that  the  manufacturer,  on  the  one  hand,  now  finds  himself 
threatened  with  not  merely  a  loss  of  profits  but  also  of  capital,  and  the  laborer,  on 
the  other  hand,  with  not  merely  a  prospect  of  reduced  wages,  but  also  with  an  ex- 
tensive limitation  of  his  opportunity  for  labor.  It  has  been  intimated,  and  probably 
with  truth,  that  the  strikes  in  the  iron-mills  of  the  country  during  the  past  summer 
have  proved  a  blessing  to  the  mill-owners.  But  be  this  as  it  may,  it  is  clear  that, 
bad  as  the  condition  of  the  mill-owners  now  is,  it  would  have  been  worse  had  it 
not  been  for  the  strikes.  All  this  experience,  however,  is  not  new,  but  has  been 
characteristic  of  the  industry  of  the  country — and  more  especially  of  the  iron  and 
steel  industries — for  the  last  thirty  years,  under  the  influence  of  frequent  modifi- 
cations of  the  tariff,  and  also  of  the  war.  What  the  people  have  gained  as  con- 
sumers at  one  time  from  extremely  low  prices  they  have  more  than  compensated 
for  at  another  by  the  payment  of  extremely  high  rates;  and  what  in  the  way  of 
high  profits  has  accrued  at  one  period  to  the  manufacturers  has  been  more  than 
offset  to  him  by  periodical  suspensions  of  industry,  loss  of  all  profits,  and  impair- 
ment of  capital.  That  such  experiences  could  be  wholly  avoided  is  not  pretended; 
but  it  may  be  claimed  that  if  Government  was  to  cease  to  interfere  through  its 
fiscal  policy  with  the  natural  course  of  production  and  exchange,  the  industrial 
course  of  affairs  would  be  much  more  stable;  and  that  any  loss  resulting  from 
abandonment  of  protection  would  be  as  nothing  in  comparison  with  the  destruc- 
tion of  capital  and  the  waste  and  misapplication  of  labor  that  has  been  and  is 
certain  to  be  the  result  of  a  continuance  of  the  existing  policy. 


94  PRACTICAL    ECONOMICS. 

and  so,  in  fact,  actually  increases  the  demand  and  consumption 
of  the  domestic  ores.  And  the  experience  of  Great  Britain, 
where  every  manufacturer  is  allowed  to  freely  exercise  his  own 
judgment  in  respect  to  the  management  of  his  own  business, 
powerfully  reinforces  this  assertion ;  for  the  British  iron-smelt- 
ers, with  a  view  of  cheapening  and  improving  their  product, 
have  long  been  in  the  habit  of  largely  importing  foreign  ores, 
altho  their  domestic  supply  of  other  ores  is  unsurpassed  in 
respect  to  either  quality  or  quantity.  The  appeal  of  the  owners 
of  the  American  iron-mines  for  an  increase  of  duties  on  the  im- 
port of  foreign  ores,  even  tho  the  returns  from  their  invest- 
ments are  not  as  profitable  as  could  be  desired,  simply  amounts, 
therefore,  to  the  asking  that  our  ability  as  a  nation  to  cheapen  the 
production  of  iron,  with  all  the  momentous  consequences  that 
would  flow  from  such  a  result,  shall  be  further  obstructed  and 
impaired.  And  altho,  according  to  the  principles  which  have 
heretofore  characterized  our  protective  legislation,  it  is  most 
inconsistent  for  iron-smelters  to  oppose  the  petition  of  the  iron- 
mine  owners,  the  request  of  the  latter  is  just  as  unreasonable 
as  would  be  that  of  a  small  teamster  to  be  allowed,  for  the 
furtherance  of  his  own  interests,  to  plant  his  horse  and  cart 
directly  across  the  "  Broadway"  of  our  large  cities  to  the  great 
obstruction  of  the  vast  tide  of  larger  interests  that  ebbs  and  flows 
through  it.  In  short,  if  the  full  supply  of  foreign  ore  is  any  ad- 
vantage to  the  American  manufacturers  of  iron,  the  great  inter- 
ests of  the  country  demand  that  they  shall  have  it.  On  the  other 
hand,  if  American  mines,  as  is  claimed,  can  furnish  ores  equally 
good  and  equally  cheap,  then  protection  is  not  needed.  That 
some  American  iron-mines  may  suffer  from  the  free  import  of 
foreign  ores  may  be  admitted  ;  but  that  the  domestic  ore-mining 
interest  in  general  is  likely  to  be  injured  by  such  a  policy,  or 
needs  any  further  protection  than  what  naturally  accrues  to  it 
from  location — the  cost  of  transportation — is  not  a  reasonable 
supposition.  And  in  support  of  this  view  attention  is  asked  to 
the  following  items  of  evidences.  An  advertisement  has  re- 
cently been  continuously  and  conspicuously  published  in  one  of 
the  New  York  financial  journals,  of  the  organization  of  an 
American  iron-ore  company,  which  states  that  the  company 
controls  5,000,000  tons  of  iron-ore,  and  that  "  contracts  are 
offered  for  300  tons  per  day  on  terms  that  will,  on  the  comple- 


TARIFF  REVISION.  95 

tion  of  certain  railway  connections,  net  the  company  over  $i  per 
ton,  or  $100,000  per  annum"  (40  per  cent)  on  a  total  capital 
stock  of  $250,000.  Again,  the  shipments  of  ore  from  the  iron- 
mines  in  the  vicinity  of  Lake  Superior  have  been  greater  during 
the  past  year  than  ever  before,  and  all  the  mines  are  reported 
as  earning  very  large  dividends.  Tracts  of  land  which  a  few 
years  ago  would  not  have  commanded  a  dollar  an  acre  are  now 
worth  millions.  One  hundred  thousand  dollars  is  said  to  have 
been  refused  during  the  past  season  for  one  sixteenth  interest 
in  the  Quinnesic  Mine  (Michigan),  which  less  than  a  year  ago. 
cost  the  owners  $15,000.  The  moment  the  price  of  pig-iron 
rises  from  any  circumstances,  that  moment  the  owners  of  the 
domestic  iron-mines,  freed  in  a  degree  from  foreign  competition, 
advance  the  price  of  ore.  When  the  price  of  iron  greatly  ad- 
vanced in  the  fall  of  1879,  tne  price  of  Lake  Superior  ore  deliv- 
ered at  Cleveland,  with  cheap  water  transportation,  rose  to  nearly 
the  same  price  as  that  of  pig-iron  at  Glasgow,  Scotland.  To  the 
mine-owners  this  advance  doubtless  seemed  a  creation  of  national 
wealth  ;  but  to  the  consumers  of  iron,  who  paid  every  dollar  of 
such  advance,  the  condition  of  things  was  somewhat  different. 

Again,  the  manufacturers  of  iron  wire  and  "  barbed  iron 
fencing,"  whose  interests  are  protected  by  patents  to  the  extent 
of  creating  a  monopoly  of  production,  and  whose  products  are 
especially  in  demand  by  the  agriculturists  of  the  country,  also  de- 
mand a  continuation  of  the  present  duty  on  the  importation  of 
foreign  competing  (steel)  wire  of  from  47  to  65  per  cent.  Per 
contra,  the  stock  of  the  principal  wire  manufacturing  company 
in  the  United  States  is  scarce  at  200 — par  100 — and  pays  regular 
dividends  of  20  per  cent  per  annum. 

In  unison  with  the  ore-miners  and  wire-manufacturers,  the 
manufacturers  of  spool-thread — a  department  of  the  cotton 
industry — are  of  the  opinion  that  the  protection  of  74  to  78  per 
cent  which  they  enjoy  under  the  present  tariff  should  also  not  be 
reduced.  Per  contra,  consider  the  following  statement  of  the 
profits  of  one  of  the  principal  thread-mills  in  the  country,  which 
recently  appeared  in  the  columns  of  the  newspaper  of  the  town 
where  the  mills  are  located : 

"The  amount  of  profits  apportioned  to  the  stockholders  of  the  Willi- 
mantic  Linen  Company  this  year  is  $1,432,000,  or  ninety-five  and  one  half 
per  cent  on  the  par  value  of  January  I,  1882.     The  total   profits  of  the 


g6  PRACTICAL    ECONOMICS. 

stockholders  for  the  past  three  years  is  $2,525,000,  which  is  two  hundred 
and  two  per  cent  on  the  par  value  of  January  1,  1880." — Willimantic 
{Conn.)  Chronicle. 

Now  as  the  general  answer  which  will  be  made  to  the  above 
statements  and  positions  will  be  that  the  existing  tariff  cannot 
be  materially  reduced  without  reducing  the  wages  of  labor,  and 
that  one  positive  effect  of  the  protective  policy  has  been  to 
secure  high  wages  to  the  American  laborer,  it  seems  advisable, 
before  further  proceeding  in  this  review  of  the  relations  of  our 
industries  to  the  tariff,  to  stop  and  ask  attention  to  a  brief  exhibit 
of  what  an  analysis  of  the  returns  of  the  recent  census  reveals  to 
us  on  this  topic.  And  first  in  respect  to  great  primary  manufac- 
tures of  cotton,  wool,  silk,  iron  and  steel,  and  the  business  of  iron- 
ore  mining:  for  the  protection  of  each  one  of  which,  high-tariff 
taxes  on  the  importation  of  all  competitive  products  have  long 
been  imposed  and  maintained. 

Class  of  Manufacture.  Jft         &§S^rHa"ud. 

Cotton  manufactures 185, 822 1  $245  47 

Silk  and  silk  goods,  etc 31, 337  29188 

Woollen  manufactures  of  all  classes 161,000  29305 

Hosiery  and  knit  goods 28,328  23053 

Iron  and  steel 140,978  393  51 

Iron-mining 31.337  301  19 

Assuming  300  working  days  in  the  year,  the  average  daily 
wages  paid  in  the  above  industries  would  be  approximately  as 
follows:  In  the  manufacture  of  cotton,  81  cents  per  day;  silk 
and  silk  goods,  97  cents;  wool,  $1  ;  iron  and  steel,  $1.31  ;  iron- 
ore  mining,  $1.  If  these  deductions  are  not  correct,  the  fault 
must  be  referred  to  the  experts  selected  by  the  Census  Bureau, 
who  professed  to  make  their  several  returns  after  careful  investi- 
gation. If,  however,  they  are  correct,  the  claim  that  high  pro- 
tection insures  high  wages  is  proved  to  be  without  foundation ; 
for  the  annual  and  daily  averages  for  labor  above  given  are  less 
than  the  averages  paid  for  labor  in  the  great  agricultural  States 
of  the  West. 

The  following  table  next  illustrates  how  wages  rise  in  those 
industries  which  use  textile  fabrics  and  iron  and  steel  in  their 
primary  forms  as  raw  materials — industries  which  employ  a  very 
much  larger  number  of  laborers,  and  for  the  most  part  cannot 
be,  or  actually  are  not,  protected  by  the  tariff. 


TARIFF  REVISION.  97 

fm        t  \m       t  ........  Hands  Average  Annual 

Class  of  Manufacture.  Employed.         Wages  per  Hand. 

Agricultural  implements 39. 580  $38806 

Boots  and  shoes 138.819'  38100 

Foundries  and  machine-shops 145.795  454*8 

Men's  clothing 160,810*  286  00 

Hardware8 4.034  424  74 

Carpentering 15.664  544  08 

Furniture-makers 19,056  47^75 

Lumber,  planing,  etc 3.739  458  53 

The  census  statistics  further  show  the  percentages  of  labor, 
reckoned  in  wages,  to  the  total  value  of  the  finished  products  of 
various  industries,  to  be  approximately  as  follows: 

In  the  manufacture  of  wool 16  per  cent. 

M  "  "  iron  and  steel 21         " 

"  "  "cotton 22         " 

"silk 37 

Iron-ore  mining 41         " 

If  now  the  price  of  foreign  fabrics,  of  cotton  and  wool,  and 
of  foreign  iron  and  steel  landed  in  the  United  States  is  in- 
creased by  reason  of  freights,  commissions,  insurance,  and  pack- 
ing to  the  extent  of  5  per  cent, — and  if  the  above-specified 
articles  are  transported  after  landing  to  any  considerable  distance 
inland,  it  is  at  least  this,  and  more, — then  it  follows  that  the 
American  manufacturers  of  cotton  and  wool,  and  iron  and  steel 
in  their  primary  forms  could  afford  to  pay  their  laborers  some 
twenty-five  per  cent  more  than  is  paid  by  their  foreign  com- 
petitors and  yet  be  on  terms  of  equality  with  the  latter  so  far 
as  wages  enter  into  and  control  the  value  of  their  products. 
Duties  ranging  from  30  to  50  per  cent  and  upwards  have,  how- 
ever, been  given  under  the  existing  tariff,  mainly  on  the  claim 
that  they  were  absolutely  necessary  to  protect  the  American 
manufacturers  against  the  advantages  enjoyed  by  foreign  manu- 
facturers of  similar  products  in  the  item  of  wages ;  but  whether 
such  claims  have  any  justification  in  fact  is  a  matter  that  may 
be  safely  left  to  the  judgment  of  the  reader. 

1  One  fourth  women. 

*  More  than  one  half  women  and  children. 

3  The  analyses  for  hardware,  carpentering,  furniture,  and  lumber  working  aie 
based  on  the  statistics  returned  from  certain  of  the  leading  cities  of  the  United 
States  and  not  from  the  whole  country;  the  latter  not  being  yet  obtainable. 


THE   MOST   RECENT   PHASES   OF   THE   TARIFF 
QUESTION.' 


I. 


THE  second  session  of  the  last  or  Forty-seventh  Congress 
will  undoubtedly  stand  in  the  fiscal  and  political  history 
of  the  United  States  as  marking  a  transition-period  in  the  sen- 
timent of  the  country  in  respect  to  the  tariff  question  of  no  little 
economic  and  political  importance.  With  the  termination  of 
the  war  and  its  requirement  for  vast  expenditures,  it  might  nat- 
urally have  been  supposed  that  the  whole  of  the  vast  and  oner- 
ous system  of  taxation  which  the  war  made  necessary  would 
have  been  promptly  reconstructed  with  a  view  to  the  entire 
abandonment  or  extensive  reduction  of  no  small  number  of 
its  burdens;  and  in  the  department  of  internal  revenue  this 
was  indeed  done,  but  very  slowly.  But  in  the  matter  of  taxes 
upon  imports,  from  which  the  largest  proportion  of  the  national 
revenues,  and  the  largest  sums  ever  collected  by  any  nation  from 
such  sources,  are  derived,  not  only  has  there  been  no  reduction 
whatever  in  the  average  rates  imposed  during  the  war,  but  on 
the  contrary,  and  in  the  case  of  very  many  articles,  the  taxes 
have  been  very  largely  increased.  That  such  a  course  of  fiscal 
policy,  or  "  the  maintenance  of  war-taxes  in  time  of  peace"  as  it 
has  been  fittingly  termed,  should  not  fail  to  encounter  some 
considerable  measure  of  popular  disapproval  might  also  have 
been  naturally  supposed ;  for  the  popular  mind,  altho  know- 
ing little  and  caring  less  concerning  economic  matters,  never- 
theless moves  pretty  promptly  and  directly  to  the  conclusion 
that  there  is  an  intimate  connection  between  high  taxes  and 

1  Princeton  Review,  May,  1883. 
98 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.      09 

an  increased  cost  of  living  and  of  production.  But,  singularly 
enough,  this  sentiment  of  disapproval  has,  until  a  very  recent 
period,  been  comparatively  limited.  In  the  first  place,  the 
masses,  finding  it  easy,  through  the  great  natural  resources  and 
rapid  development  of  the  country,  to  obtain  employment  and  a 
living,  and  being  also  naturally  disinclined  to  reason  on  such 
subjects,  have  either  allowed  themselves  to  remain  indifferent 
or  to  be  easily  persuaded  into  the  acceptance  of  any  opinions  or 
assumptions  that  might  be  plausibly  urged  upon  them.  While, 
in  the  second  place,  the  so-called  manufacturing  interests  of  the 
country,  accepting  almost  universally  the  proposition  that  the 
maintenance  of  high  taxes  upon  the  importation  of  nearly  all  for- 
eign products,  and  the  abandonment  of  all  federal  taxes  upon  all 
similar  or  competing  domestic  products,  were  essential  to  their 
prosperity,  have  through  their  intelligence,  social  position,  and 
large  command  and  use  of  money  wielded  an  influence  in  behalf 
of  their  faith  so  irresistible,  that  the  prediction  has  often  been 
expressed  that  nothing  could  prevail  against  it  until  natural 
circumstances  forced  its  representatives  to  radical  differences  of 
opinion  among  themselves. 

The  business  of  dissent  from  the  tariff  policy  of  the  federal 
government  since  the  war  has  therefore  been  mainly  relegated 
(one  meaning  of  which  term  is  "to  banish")  to  a  comparatively 
few  persons,  and  those  mainly  clear-headed  and  enthusiastic 
young  men,  who,  as  has  always  been  the  case  in  every  other 
movement  in  the  world's  history  for  the  extension  of  human 
liberty,  have  had  but  the  minimum  of  personal  grievance 
to  complain  of,  but  whose  motive  and  inspiration,  impelling 
to  work  and  sacrifice  for  the  cause  they  advocated,  was  sim- 
ply the  love  of  truth  and  right,  for  the  truth  and  right's  sake. 
To  men  whose  opinions  about  the  tariff  are  controlled  mainly 
by  their  pocket  interests,  and  indeed  to  all  who  have  been 
educated  to  believe  that  government — which  never  has  any- 
thing in  the  way  of  money  or  property  but  what  it  has  pre- 
viously taken  from  the  people — can  create  national  prosperity  by 
arbitrarily  taking  the  result  of  accumulated  labor  from  one  man 
and  arbitrarily  giving  it  to  another,  such  motives  appear  absurd 
and  incredible  ;  and  in  default  of  any  other  motives  that  would 
seem   reasonable  to  those  thus   reasoning,  the    hypothesis  of 


IOO  PRACTICAL    ECONOMICS. 

organized  corruption  and  thorough  disloyalty  to  American  in- 
stitutions has  been  resorted  to,  proclaimed,  and  extensively  ac- 
cepted. Hence  the  statements  first  made,  it  is  believed,  by 
Horace  Greeley  and  H.  C.  Carey,  and  since  positively  re- 
peated and  enlarged  upon  by  such  men  as  W.  D.  Kelley, 
Cyrus  Hamlin,  president  of  Middlebury  College,  Vermont, 
John  L.  Hayes,  late  President  of  the  Tariff  Commission,  and 
many  other  lesser  lights,  that  the  leaders  of  the  cause  of  "  free 
trade,"  "  tariff  for  revenue  only,"  and  "  free  ships,"  and  the  re- 
peal of  our  navigation  laws,  receive  their  inspiration  and  were 
bought  up  to  do  their  work  through  "  British  gold;"  and  that 
organizations  for  the  purpose  of  raising  and  disbursing  funds  for 
such  purposes  in  the  United  States — as,  for  example,  the  Cob. 
den  Club — regularly  existed  and  were  successfully  operated  in 
Great  Britain.  Such  statements  and  assertions  up  to  the  present 
time  have  seemed  too  silly  to  require  anything  in  the  way  of 
positive  challenge  and  denial ;  but  when  a  recurrence  to  and  a 
general  use  of  them  still  constitute  a  marked  phase  of  the 
current  tariff  discussion,  and  seem  likely  to  continue,  it  may  be 
well  to  here  state,  for  the  special  benefit  of  those  whose  char- 
acter and  self-respect,  in  spite  of  most  decided  opinions  and 
prejudices,  will  not  allow  them  to  deliberately  falsify,  first : 

That  the  transmission  on  the  part  of  any  organization  or  in- 
dividual in  Great  Britain  or  Europe  to  the  United  States  of  money 
or  credit,  to  the  extent  of  a  single  dollar,  for  the  purpose  of  aiding 
any  free  trade  or  anti-protection  movement  in  the  latter  country 
is  not  known  to  any  American  representative  of  such  movement 
to  have  ever  occurred ;  and  the  receipt  of  any  such  aid  by  any 
journal  or  organization  advocating  free  trade  in  the  United 
States,  or  by  any  person  officially  connected  with  such  organiza- 
tion, is  not  only  here  unqualifiedly  denied,  but  the  ability  on  the 
part  of  any  one  to  furnish  a  scintilla  of  evidence  to  the  contrary 
is  also  here  positively  challenged  and  disputed.  And  secondly,  as 
respects  the  Cobden  Club,  which  is  declared  and  extensively  be- 
lieved by  protectionists  to  be  a  foreign  propaganda  of  free  trade 
of  wonderful  activity,  and  the  organization  through  which  large 
sums  of  money  are  constantly  raised  and  disbursed  for  in- 
fluencing public  opinion  in  the  United  States,  the  following 
statements  are   further  submitted.     This  club  was  founded  in 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION,     IOI 

1866  with  the  object  of  encouraging  the  growth  and  diffusion 
of  those  economic  and  political  principles  with  which  the  name  of 
Richard  Cobden  is  associated,  and  which  are  also  briefly  but  com. 
prehensively  expressed  in  the  motto  which  the  club  has  adopted 
and  caused  to  be  engraved  upon  its  seal;  namely,  "Free  Trade, 
Peace  and  Good  Will  among  Natio?is."  Altho  the  headquarters 
of  the  Cobden  Club  are  in  London,  it  enrolls  among  its  members 
nearly  all  the  leading  economists  and  statesmen  of  Europe:  as, 
for  example,  Gladstone,  Bright,  the  Duke  of  Argyle,  Sir  John 
Lubbock,  Sir  Charles  Dilke,  Robert  Giffen,  Thomas  Brassey,  and 
James  Caird,  of  England;  Leon  Say,  Leroy  Beaulieu,  Jules 
Simon,  Henri  Cernuschi,  and  Maurice  Block,  of  France;  Schulze- 
Delitzsch  and  Karl  Blind,  of  Germany;  Emilio  Castelar,  of  Spain ; 
Frere  Orban  and  M.  Laveleye,  of  Belgium ;  Prof.  Cossa,  Quin- 
tine  Sella,  and  Marco  Minghetti,  of  Italy;  and  in  the  United 
States,  Pres.  Woolsey,  Anderson,  Gilman,  and  Gen.  Walker; 
Geo.  Bancroft,  Edward  Atkinson,  C.  F.  Adams,  Jacob  D.  Cox, 
H.  W.  Beecher,  E.  N.  Horsford,  E.  P.  Whipple,  and  Hugh  Mc- 
Culloch ;  while. on  the  roll  of  deceased  members  are  found  the 
names  of  Baron  Bunsen,  Count  Corsi,  Leon  Gambetta,  Michel 
Chevalier,  James  A.  Garfield,  John  Stuart  Mill,  L.  F.  S.  Foster, 
Charles  Sumner,  H.  W.  Longfellow,  R.  W.  Emerson,  Samuel 
Bowles,  W.  C.  Bryant,  Francis  Lieber,  Isaac  Sherman,  Amasa 
Walker,  Samuel  Ruggles,  Wm.  Lloyd  Garrison,  and  others:  the 
name  of  any  one  of  whom  is  sufficient  proof  that  no  organization 
in  which  it  was  voluntarily,  continuously,  and  sympathetically  en- 
rolled, could  be  anything  not  in  the  highest  degree  honorable  and 
open  in  all  its  transactions  to  public  inspection.  The  receipts 
and  expenditures  of  the  Cobden  Club  are  annually  audited  and 
published  in  detail  in  the  leading  journals  of  England;  and  its 
total  income  for  the  carrying  out  of  its  plans  has  never  been 
as  much  in  any  one  year  as  $15,000;  with  the  single  exception 
of  1 88 1,  when  a  special  publication  fund  of  $8860  was  con- 
tributed, and  of  which  $5140  was  appropriated  for  the  publica- 
tion and  distribution  of  works  on  "  Systems  of  Land  Tenure." 
From  the  regular  receipts  are  defrayed  the  expenses  of  an  an- 
nual dinner  of  the  members ;  the  salaries  of  a  secretary  and 
clerk ;  the  expense  of  medals  which  the  club  annually  awards 
for  the  best  essays  on  any  subject   connected  with    political 


102  PRACTICAL    ECONOMICS. 

economy  by  the  students  of  various  leading  colleges  in  the 
world  (Harvard,  Yale,  and  Williams,  in  the  United  States);  and 
the  publication  and  distribution  of  a  great  variety  of  books  and 
tracts  on  many  subjects,  additional  to  those  pertaining  specially 
to  free  trade.1  When,  therefore,  Hon.  W.  D.  Kelley,  M.  C,  de- 
clared, in  the  political  campaign  of  1880,  that  the  Cobden  Club 
had  raised  and  transmitted  to  the  United  States  more  than  a  mil- 
lion of  dollars  for  influencing  the  national  election  of  that  year; 
and  the  Rev.  Cyrus  Hamlin,  a  minister  of  the  gospel  and  presi- 
dent of  a  New  England  college,  writes  in  the  Journal  of  the 
American  Agricultural  Association  for  November,  1882,  that  the 
Cobden  Club  "  has  expended  vast  sums  during  the  last  twelve  or 
fifteen  years  to  incite  our  (Americaii)  farmers  against  the  govern- 
ment and  our  manufacturers  /'  and  that  "  millions  of  copies  of  an 
appeal  to  American  farmers  were  issued"  (by  it)  "  and  distributed 
all  over  the  land,"  it  is  certain  that  these  gentlemen,  if  they 
claim  to  be  men  of  honor,  have  placed  themselves  in  a  position 
not  a  little  embarrassing  and  dishonorable.  For  they  either 
knew  or  did  not  know  whereof  they  affirmed..  If  they  knew, 
then  they  were  guilty  of  uttering  unqualified  and  intentional 
falsehoods ;  and  if  they  did  not  know,  they  used  words  without 
meaning,  and  recklessly,  if  not  intentionally,  deceived  their 
hearers  or  readers.2 

1  The  following  is  a  more  detailed  exhibit  of  the  income  of  the  Cobden  Club 
since  its  organization,  as  derived  from  its  official  reports:  For  the  seven  years 
from  1866  to  1873  lhe  total  income  was  ^8204  ($41,020),  or  at  the  rate  of  $5857 
per  annum;  1878,  ^1529;  1879,  £^2S*  1880  (the  year  of  the  U.  S.  Presidential 
election),  ^2557;  and  for  1881,  .£4163,  of  which  ^1028  were  appropriated  to  the 
publication  of  works  on  the  subject  of  land-tenure.  Among  other  works  pub- 
lished or  distributed  by  the  Club  during  this  same  year,  when,  according  to  Judge 
Kelley,  a  million  of  dollars  was  appropriated  to  the  United  States,  were  Caird's 
"Landed  Interest;"  Maclehose's  "Value  of  Political  Economy;"  Watterson's 
"  British  Commerce;"  "The  Financial  Reform  Almanac;"  Apjohn's  "Cobden 
and  Bright;"  Potter's  "Workman's  Views  of  Free  Trade;"  Krebs's  "  Working- 
man  on  Reciprocity;"  together  with  reports  of  meetings,  lists  of  members,  ac- 
counts, etc.  etc. 

8  As  further  illustrating,  notwithstanding  the  above  exhibit,  the  extent  to 
which  the  Cobden  Club  has  been  effectually  used  as  a  "bogie"  in  the  United 
States  for  the  raising  of  money  and  the  controlling  of  votes  in  support  of  high 
protection,  attention  is  also  asked  to  the  following  extract  from  the  Report  of  the 
American  Iron  and  Steel  Association  for  the  year  1881:  "During  the  Presiden- 
tial and  Congressional  campaign  of  last  year"  (1880)  "the  Cobden  Club  of  England 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION     103 

Recurring  to  the  assertion  before  made,  that  the  last  session 
of  the  last  or  Forty-seventh  Congress  marks  a  transition-period 
of  permanence  and  importance  in  the  sentiment  of  the  country 
on  the  tariff  question,  the  following  review  of  the  situation  would 
seem  to  forbid  any  other  conclusion. 

Nothing  is  more  sensitive  to  changes  in  public  opinion  than 
the  American  politician,  or  more  quick  to  respect  them  than  the 
Federal  Congress;  and  the  circumstance  that  Congress  at  its 
last  session  devoted  most  of  its  time  to  a  consideration  of  a 
reform  of  the  tariff,  and  that  the  political  party  dominant  in 
both  Houses  did  not  dare  to  adjourn  without  taking  some  action 
upon  it,  even  tho  such  action,  as  it  turned  out  to  be,  was 
little  more  than  a  pretence,  is  certain  proof  that  the  tariff,  from 
a  merely  political  point  of  view,  cannot  longer  be  treated,  and 
as  in  former  years,  with  political  neglect  and  indifference. 

Again,  no  one  who  has  given  the  subject  any  attention  has 
any  doubt  that  the  United  States  has  at  present  more  active 
capital,  machinery,  and  labor  engaged  in  the  so-called  work  of 
manufacturing  than  is  necessary  to  supply  any  present  or  im- 
mediate prospective  demand  for  domestic  consumption.  And  as 
general  evidence  confirmatory  of  this  position,  citation  may  be 
made,  first,  of  the  general  and  increasing  complaint  on  the  part 
of  American  manufacturers  of  over-production ;  in  connection 
with  which  attention  is  here  asked  to  the  very  significant  fact 
recently  brought  out  by  the  N.  Y.  Public,  namely,  that  while 
the  domestic  exchanges  for  the  past  year  (1882)  show  a  very 
marked  increase  as  respects  the  manufacturing  centres  of  the 
country,  the  exchanges  at  the  great  distributing  centres  on  the 
other  hand  show  a  marked  decrease,  with  accompanying  heavy 
losses  and  shrinkage  in  business.  Second,  the  interruption  of 
great  branches  of  domestic  industry,  of  which  examples  are  to 
be  found  in  the    recent    suspension    of  the  entire  business  of 

threw  off  all  disguise,  and  sought  directly  to  influence  the  free  expression  of  the 
popular  will  in  many  States  by  circulating  large  quantities  of  English-printed 
books  and  pamphlets  which  outrageously  misrepresented  the  effects  of  our  pro- 
tection policy,"  etc.  This  association  promptly  undertook  the  work  of  counter- 
acting this  movement  of  the  Cobden  Club,  and  a  series  of  protective  tracts, 
embracing  over  half  a  million  copies,  was  printed  and  circulated  in  the  wake  of 
the  free-trade  publications." 


1 04  PR  A  C  TIC  A  L     E  CONOMICS. 

cotton  manufacture  in  Philadelphia  and  vicinity ;  of  the  dis- 
continuance in  all  or  great  part  of  the  India-rubber  and  gunny- 
bagging  manufacture;  of  the  reduction  of  sugar-refining  in- 
dustry to  about  60  per  cent  of  its  existing  capacity;  and  the 
suspension  or  failure  of  some  of  the  most  important  iron- 
furnaces  and  rolling-mills  of  the  country.  And  third,  the  ac- 
tual or  attempted  reduction  of  wages  in  almost  every  depart- 
ment of  domestic  manufacturing  industry;  the  recent  united 
effort  for  this  end  of  the  representatives  of  all  the  iron-works 
west  of  the  Alleghanies  being  especially  noteworthy. 

Next,  a  large  amount  of  evidence  to  the  same  effect  of  a  more 
specific  character,  and  in  the  highest  degree  interesting  and  in- 
structive, has  also  recently  been  made  public.  Thus,  during  the 
past  winter,  a  resolution  was  introduced  into  the  Legislature  of 
Massachusetts  urging  upon  the  representatives  of  that  State  in 
Congress  "the  importance  of  reducing  the  national  taxes  and  the 
propriety  of  abolishing  as  fast  as  possible  {without  too  great 
injury  to  vested  interests}  the  taxes  upon  imports,  except  so  far  as 
may  be  necessary  for  a  revenue  to  meet  the  prudent  and  economi- 
cal expenses  of  the  government."  Had  such  a  resolution 
been  introduced  into  this  body  five  or  ten  years  ago  it 
would  probably  have  been  received  with  almost  as  much  of 
surprise  as  a  resolution  in  favor  of  the  re-establishment  of 
domestic  slavery,  and  would  probably  have  been  as  uncere- 
moniously treated.  And  as  it  was,  had  the  committee  to 
whom  the  resolution  was  referred  been  governed  solely  by 
their  private  opinions,  a  majority,  it  is  understood,  would  have 
summarily  voted  "  leave  to  withdraw."  But  under  the  circum- 
stances a  full  and  respectful  hearing,  extending  over  some  weeks, 
was  granted  to  all  interested.  And  to  this  hearing  came,  among 
others,  Mr.  Howard  M.  Newhall,  one  of  the  leading  shoe-manu- 
facturers of  the  famous  Massachusetts  shoe -manufacturing 
town  of  Lynn,  who  gave  testimony  of  such  a  startling  character 
that  any  discussion  of  the  subject  would  be  incomplete  that 
failed  to  embody  its  nearly  complete  statement  as  reported. 

"I  have  come  before  this  Committee,"  said  Mr.  Newhall,  "to  present  a 
few  facts  in  regard  to  one  specific  branch  of  business  interest — a  protected 
shoe  industry.  The  shoe  industry  is  the  most  thoroughly  American  in 
its  parts  of  any  of  our  great  industries.     A  few  years  before  i860  few 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     105 

would  have  dared  to  predict  that  a  shoe  could  ever  be  made  by  machin- 
ery, or  that  in  a  quarter  of  a  century  there  would  be  so  many  people  em- 
ployed in  making  shoes  by  machinery  as  to  render  the  American  market 
altogether  too  small  for  their  industrial  capacity.  Yet  such  is  the  fact. 
In  Lynn  alone  the  capacity  is  three  hundred  thousand  pairs  of  shoes  per 
week,  and  Lynn  is  only  one  great  representative  of  a  great  many  shoe- 
manufacturing  centres  in  New  England,  New  York,  Pennsylvania,  and  the 
West.  This  is  its  present  capacity,  but  the  power  of  enlarging  this  ca- 
pacity is  unlimited.  This  whole  system  could  be  duplicated  and  redupli- 
cated if  necessary  within  a  short  term  of  years.  With  such  facilities  it  is 
very  natural  that  the  business  should  soon  outgrow  the  home  consump- 
tion. Where  a  few  years  ago  it  took  nine  months  in  each  year  to  shoe 
this  country,  it  now  takes  but  six  months,  and,  with  the  present  increase 
of  factories,  a  few  years  hence  it  can  be  done  in  less  than  that  time.  Of 
course  the  increase  of  capacity  engenders  competition  among  the  manu- 
facturers, and  there  is  a  constant  incentive  to  underbid  the  market  to 
secure  trade.  As  in  all  trade,  a  low  price  (often  quoted)  "  sets"  the  mar- 
ket, and  in  order  to  meet  the  market  articles  have  to  be  made  cheaper  at 
the  expense  of  the  operatives.  If  the  materials  used  to  make  a  shoe  go 
up  in  price,  labor  always  has  to  go  down.  Strikes  result,  as  that  seems 
to  be  the  only  way  the  laborer  can  protect  himself  from  the  encroachment 
of  the  employer.  In  a  general  strike  in  a  shoe-manufacturing  centre  the 
operatives  often  gain  temporary  advantage,  but  with  a  supply  greater  than 
demand  it  cannot  long  continue.  A  shoe-factory  is  what  might  be  called 
"  portable,"  and  when  a  manufacturer  cannot  have  his  own  way  in  one 
locality  he  goes  where  he  can.  When  he  finds  he  cannot  make  shoes 
cheap  enough  in  some  great  centre,  he  finds  some  quiet  country  town 
where  he  starts  a  factory  and  is  able  to  make  shoes  at  less  price.  His 
city  competitor  is  deprived  of  just  so  much  work,  and  is  obliged  to  ask  of 
his  employes  a  reduction  in  wages  if  they  wish  to  save  their  work  from 
going  away.  The  general  sequence  of  a  strike,  then,  is  the  establishment 
of  country  factories,  so  called,  and  the  sequence  of  country  factories  is  a 
forced  reduction  in  wages.  Every  time  this  programme  has  been  repeated 
in  the  last  few  years  it  has  left  wages  on  a  lower  basis." 

"  Gentlemen,  do  not  blame  the  manufacturer  for  trying  to  meet  the 
market,  or  blame  the  operative  for  resisting  a  reduction  in  wages.  It  all 
goes  to  show  that  the  supply  is  greater  than  the  demand,  and  that  our 
market  is  not  large  enough.  Perhaps  you  may  wonder  how  and  where 
we  are  "  protected"  in  our  shoemaking.  I  will  mention  two  or  three  arti- 
cles specially,  and  speak  of  the  others  generally.  Take,  for  instance, 
serges  or  lastings.  The  average  duty  on  the  serges  or  lastings  used  in  the 
manufacture  of  shoes  is  85  per  cent.  And  how  many  factories  do  you 
think  are  protected  by  this  enormous  duty  ?  I  know  of  only  two — one  at 
Oswego,  N.  Y.,  the  other  at  Woonsocket,  R.  I.  I  may  be  in  error,  but 
these  are  all  which  have  been  named  to  me,  altho  I  have  made  diligent 
inquiry.    As  another  instance,  lake  that  well-known  article,  French  kid, 


106  PRACTICAL    ECONOMICS. 

or,  in  fact,  kid  of  any  foreign  make.  Kid  requires  a  duty  of  25  per  cent 
on  the  average.  French  kid  costs  all  the  way  from  $18  to  $45  per  dozen 
skins,  according  to  the  quality.  An  average  skin  would  cost  about  $30 
per  dozen,  and  each  skin  would  cut  about  one  pair  of  shoes.  Hence  the 
prospective  penalty  for  wearing  soft,  pliable  French  kid  shoes  is  sixty 
cents  before  the  process  of  making  the  shoe  has  begun.  This  appeals  to 
our  own  pockets,  but  in  its  broader  sense  we  are  at  just  sixty  cents'  disad- 
vantage in  competition  with  the  rest  of  the  world  in  that  grade  of  shoe. 
The  light,  pliable  glove-calf  of  foreign  manufacture  is  taxed  by  a  duty  of 
20  per  cent.  I  have  selected  the  serges,  kid,  glove-calf,  which  perhaps 
form  a  sufficient  variety  to  illustrate  the  argument.  In  the  warm  climates 
where  we  must  push  our  foreign  shoe-trade,  those  of  the  inhabitants  who 
wear  shoes  require  just  these  very  kinds  of  shoes  which  have  been  men- 
tioned. American  calf,  goat,  or  grain  is  too  heavy  for  use  in  warm  coun- 
tries, and  if  we  are  to  compete  with  foreign  manufacturers  we  need 
every  advantage  of  competition.  Cottons,  nails,  tacks,  buttons,  thread, 
all  have  to  be  used  in  the  make-up  of  a  shoe,  and  they  are  protected. 
The  iron  from  which  we  make  our  machinery  is  protected.  If,  as  is  face- 
tiously said,  we  make  shoes  of  paper,  that  is  protected  too.  In  short,  you 
have  paid  a  duty  on  nearly  every  component  part  of  the  shoe  which  you 
are  now  wearing  on  your  foot." 

"  America  is  the  home  of  the  shoe-trade.  Almost  every  other  large 
manufacturing  business  was  imported,  and  mechanics  had  to  be  taught  by 
men  who  were  paid  to  come  here  and  teach  them.  But  the  Yankees  in- 
vented their  own  shoe-machinery,  and  no  one  had  to  be  imported  to 
teach  them  how  to  run  it.  The  best  educated  factory  population  in  New 
England  is  that  found  in  your  "shoe-towns."  They  are  thrifty,  strive  to 
own  their  own  homes,  and  represent  the  very  best  side  of  a  working  popu- 
lation." 

"  Perhaps  you  may  ask  what  may  be  the  general  opinion  of  the  Lynn 
shoe-manufacturers  on  any  question  looking  toward  a  modification  of  the 
tariff.  There  has  been  but  one  organized  effort  to  test  their  opinion,  and 
that  a  short  time  since,  when  an  effort  was  made  to  increase  the  duty  on 
India  skins  from  15  per  cent  to  25  per  cent.  A  petition  was  sent  to 
Washington,  very  generally  signed  by  the  shoe-manufacturers,  protesting 
against  any  increase ;  and  from  this  we  may  judge  that  they  are  alive  to 
the  fact  that  their  next  move  is  toward  reduction. 

"  A  removal  of  duty  from  all  articles  used  in  the  manufacture  of  a  shoe 
.would  be  an  advantage  to  employer  and  employed.  Why,  up  in  Canada, 
and  in  the  provinces,  they  have  been  obliged  to  protect  themselves  from 
American  shoes  by  a  duty  of  25  per  cent ;  and  even  tho  we  are  having 
to  pay  a  tariff  on  importation  and  exportation  we  are  sending  as  many 
shoes  into  Canada  as  ever.  This  alone  proves  what  our  shoe-manufactur- 
ing industry  is  capable  of  achieving  if  it  can  have  a  chance.  There  is  no  other 
country  knows  how,  or  could  make  shoes  as  fast  and  as  cheap  as  the. 
Yankees,  and  all  we  need  is  one  end  of  the  bargain.     If  we  are  able  to  sell 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     107 

our  goods  when  protected  and  protected  against,  if  half  the  disadvantage 
we  now  stagger  under  were  removed,  we  could  soon  push  ourselves  into  a 
place  where  the  world's  buyers  could  not  afford  to  purchase  from  any 
other  market." 

During  the  year  ending  March  I,  1883,  62  new  paper-mills 
have  gone  into  operation,  and  37  additional  were  in  course  of 
construction.  The  Paper-Trade  Journal  thus  reports  the  opin- 
ions concerning  the  prospect  ahead  of  certain  leading  members 
of  this  department  of  manufacturing  industry :  Wellington 
Smith,  of  Lee,  Massachusetts,  thinks  the  present  supply  of 
paper  in  the  United  States  is  in  excess  of  the  demand ;  that 
prices  are  lower  than  last  year,  and  that  his  mills  find  it  neces- 
sary to  suspend  one,  two,  or  three  days  in  the  week  in  dull 
times,  "  giving  the  help  something  to  live  on  and  keeping  the 
organization  complete."  But  as  the  Springfield  Republican  in 
commenting  on  this  state  of  affairs  significantly  remarks,  "  if 
this  remedy  is  resorted  to  frequently,  this  condition  is  likely 
to  become  chronic  and  somebody  projects  a  new  mill  to  do 
the  very  work  which  ought  to  be  done  in  the  idle  '  one,  two, 
or  three  days'  of  the  existing  mills."  William  A.  Russell,  a 
leading  paper-manufacturer  and  a  representative  of  Massachu- 
setts in  Congress,  says  that  low  water  has  restricted  produc- 
tion heretofore,  but  "when  the  old  mills  are  turning  out  their 
full  product,  and  this  new  product  is  placed  upon  the  market, 
we  are  to  see  a  crowded  and  restless  time  among  manufac- 
turers." He  thinks  that  even  the  pulp-makers,  "with  15  new 
pulp-mills  started  during  the  past  year,"  "will  find  difficulty  in 
marketing  their  pulp  in  the  immediate  future." 

A  comparatively  few  years  since  the  India-rubber  manu- 
facturers operated  their  mills  full  time  all  the  year  through. 
Consumption  within  the  last  three  years  is  said  to  have  doubled, 
and  to  have  attained  a  present  annual  value  of  $38,000,000. 
But  the  capacity  of  the  mills  in  existence  at  the  same  time 
is  also  reported  to  be  equal  to  supplying  an  annual  domestic 
consumption  of  full  $60,000,000;  and  there  being  no  such  de- 
mand, the  manufacturers  have  gladly  taken  advantage  of  a 
"corner"  in  their  raw  material  to  almost  entirely  suspend  pro- 
duction. 

Gunny-cloth  is  the  name  given  to  a  coarse  textile  used  largely 


108  PRACTICAL    ECONOMICS. 

for  cotton  baling  and  other  bagging,  and  manufactured  from 
the  coarse,  cheap  fibre  of  the  butts,  or  lower  part  of  the  stalk 
of  the  plant  that  yields  the  so-called  "jute"  fibre.  As  the  jute 
plant  has  thus  far  been  successfully  grown  only  in  India,  and  as 
labor  in  that  country  is  in  most  plentiful  supply,  at  rates  of 
wages  which  even  in  the  much-talked-of  "  pauper  countries"  of 
Europe  would  be  considered  as  insufficient,  it  would  seem, 
reasoning  a  priori,  utterly  hopeless  to  expect  that  any  manu- 
facturer could  ever  successfully  make  gunny-cloth  in  the  United 
States,  even  if  he  were  not  under  the  necessity  of  transporting 
his  raw  material  twelve  thousand  miles,  or  half  round  the  globe, 
and  of  paying  a  duty  on  its  arrival  of  $6  per  ton.  And  yet 
through  the  invention  and  application  of  machinery  with  which 
the  hand-labor  of  India  cannot  compete '  this  has  been  done  to 
such  an  extent  that  the  United  States  now  practically  manufac- 
tures its  own  gunny-cloth,  and  the  importation  of  this  article 
from  India,  which  was  formerly  very  great,  has  become  compar- 

1  The  following  story,  which  comes  to  the  writer  as  strictly  authentic,  strik- 
ingly illustrates  the  nature  and  economic  effect  of  this  new  application  of  ma- 
chinery, and  it  also  constitutes  a  demonstration  of  the  falsity  of  the  popular 
assertion  and  belief  that  it  is  the  comparative  rates  of  wages  in  different  com- 
peting countries  which  determines  the  comparative  cost  of  production  and  the 
necessity  of  tariff  protection. 

Some  time  since  a  gentleman,  manifestly  of  oriental  lineage,  appealed  for 
leave  to  inspect  the  operations  of  one  of  the  large  gunny-cloth  manufactories  in 
the  vicinity  of  New  York.  He  was  courteously  admitted,  when  the  following 
conversation  ensued: 

Oriental — I  have  come  all  the  way  from  Calcutta  to  find  out  why  you  Ameri- 
cans no  longer  import  my  bagging  as  you  used  to,  but  instead  of  it  import  the 
jute  butts  and  make  the  bagging  here;  I  don't  understand  it. 

Manufacturer — Because  we  can  manufacture  cheaper  here  than  you  in  Cal- 
cutta. 

Oriental — How  can  that  be  ?     What  does  that  weaver  earn  a  day? 

Manufacturer — About  a  dollar  and  a  half.     It  is  heavy  work. 

Oriental — Well,  weavers  in  Calcutta  work  for  less  than  a  tenth  part  as  much. 

Manufacturer — Yes  ;  but  what  does  it  cost  you  to  weave  your  bagging  per 
yard? 

Oriental — About  three  cents. 

Manufacturer — Well,  that  weaver's  work  costs  half  a  cent  a  yard,  and  we  can 
make  a  better  article  than  the  imported  cloth  with  a  less  weight  of  fibre.  That 
is  the  difference  between  our  machinery  and  yours.     Now  do  you  see  it  ? 

Oriental — I  see  that  I  have  come  all  the  way  from  Calcutta  to  find  out  that  I 
am  a — fool  not  to  have  seen  it  before.     Good-morning. 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     109 

atively  unimportant ;  the  decline  in  imports  of  gunny-bagging 
having  been  from  18,800,000  lbs.  in  1872  to  2,490,000  lbs.  in  1882  ; 
and  of  gunny-cloth,  not  bagging,  from  32,000,000  lbs.  in  1867 
to  226  lbs.  in  1882.  On  the  other  hand,  the  importation  of  jute 
butts  (the  raw  material)  increased  from  157,000  bales  in  1874  to 
320,174  in  1882.  The  success  which  attended  the  efforts  of 
those  who  originally  embarked  in  this  manufacture  was  such 
that  others  have  been  rapidly  tempted  to  engage  in  it,  so  that 
there  are  now  about  30  manufactories  of  gunny-cloth  and  cot- 
ton bagging  in  the  United  States,  with  a  reported  capacity  of  pro- 
ducing 50,000,000  yards  a  year,  or  a  quantity  sufficient  to  bale  a 
crop  of  cotton  2,000,000  bales  larger  than  has  as  yet  been  pro- 
duced. Under  such  circumstances  the  manufacturers  are  es- 
pecially troubled  with  "  over-production."  The  stock  on  hand 
is  reported  to  be  enormous  :  some  mills  have  failed  ;  others 
have  shut  down  temporarily  or  permanently ;  while  the  sense  of 
a  general  meeting  of  manufacturers  recently  convened  in  New 
York  was  to  voluntarily  close  all  their  mills  until  the  present 
stock  on  the  domestic  market  is  greatly  reduced  or  exhausted. 

Now  these  and  many  other  similar  illustrations  which  might 
be  further  adduced,  did  space  suffice,  demonstrate  beyond  all 
question  that  the  present  most  urgent  and  most  important  ques- 
tion of  the  hour — a  question  that  admits  and  will  demand  consid- 
eration alike  from  a  political,  economic,  moral,  and  social  stand- 
point— is,  How  shall  an  extension  of  markets  for  the  products  of 
our  industries  be  attained?  For  in  default  of  such  a  result  our 
manufacturing  operations  cannot  be  continued  with  full  activity 
without  glutting  the  home  market  with  their  products  ;  which  in 
turn  must  force  a  suspension  of  business,  entail  serious  losses 
on  employers,  and  restriction  of  opportunity  for  employment  and 
reduction  of  wages  to  employes.  And  it  is  just  this  result  and 
state  of  things  which  now  characterizes  the  manufacturing  indus- 
tries of  the  country,  and  which,  under  our  existing  national  fiscal 
policy,  is  certain  to  continue.  Every  manufacturer  knows  in- 
stinctively that  if  he  could  produce  and  sell  with  greater  cheap- 
ness he  could  sell  more  largely,  and  so  acquire  larger  markets 
for  his  products  both  at  home  and  abroad.  There  is  no  limit  to 
the  consumption  of  desirable  commodities,  if  the  price  of  such 
commodities  is  brought  within  the  ability  to  purchase  of  those 


1 1 0  PR  A  C  TIC  A  L    E  CONOMICS. 

who  desire  to  consume.  There  can  be,  furthermore,  no  such 
thing  as  their  overproduction,  so  long  as  any  backs  are  bare, 
stomachs  empty,  and  bodies  cold ;  but  there  is  such  a  thing  as 
imperfect  and  faulty  distribution  of  desirable  products  of  labor, 
growing  out  of  artificial  or  avoidable  impediments  such  as  taxes, 
selfishness,  ignorance,  and  imperfect  methods  and  instrumental- 
ities of  production. 

But  how  shall  the  American  manufacturer  produce  cheaper 
(or  at  least  as  cheap  as  his  foreign  competitor)  in  respect  to  many 
articles  for  which  he  has  the  greatest  natural  or  acquired  advan- 
tages, and  so  solve  to  a  great  extent  the  difficulties  which  now 
environ  him  ?  There  are  but  two  ways  (it  being  taken  for 
granted  that  he  is  not  deficient  in  the  invention  and  use  of  ma- 
chinery).1 He  must  have  cheaper  raw  materials,  the  crude  forms 
of  the  metals,  coals,  fibres,  dye-stuffs,  chemicals,  unmanufactured 
wood,  etc.,  or  he  must  have  cheaper  wages,  or  labor.2  But  the 
former,  a  tariff  like  that  recently  enacted  (which  levies  taxes  for 
purposes  other  than  revenue)  ordains  that  the  American  manu- 
facturer shall  not  have ;  (as  is  strikingly  illustrated,  for  example, 
in  connection  with  the  exhibit  above  given  of  the  present  con- 
dition of  the  domestic  gunny-cloth  manufacture,  by  the  recent 
refusal  of  Congress  to  take  off  the  duty  on  jute  butts);  so  that 
there  remains  to  him  the  only  other  alternative  to  a  curtail- 
ment or  suspension  of  business,  namely,  that  of  reduction  of 
wages.  And  this  is  what  the  American  manufacturing  employer 
is  now  everywhere  trying  to  effect,  and  what  the  employed  every- 
where is  instinctively  resisting.  But  what  chance  has  the  latter 
to  succeed  in  this  contest,  with  some  six  to  seven  hundred  thou- 
sand new  laborers  coming  into  the  country  every  year  from  other 
countries,  while  the  whole  number  of  laborers  primarily  engaged 

1  In  view  of  reports  of  American  consuls  that  large  quantities  of  old  woollen- 
machinery,  which  English  manufacturers  have  discarded  are  continuously  bought 
for  the  price  of  old  metal  and  exported  to  the  United  States  for  manufacturing 
use,  perhaps  the  assumption  is  not  fully  warranted. 

2  It  would  seem  as  if  the  talk  of  the  necessity  of  having  cheaper  transporta- 
tion in  general  was  coming  to  an  end  when  leading  American  railroads  report  that 
they  can  carry  freight  at  half  a  cent  a  ton  a  mile  and  make  a  profit  on  the  tran- 
saction; and  when  the  cost  of  the  ocean  transport  of  fresh  meat  from  the  United 
States  to  England  has  recently  been  as  low  as  one  cent  per  pound,  or,  including 
insurance  commissions,  transport,  and  sale,  not  in  excess  of  two  cents  per  pound. 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     I 1  I 

in  all  the  manufacturing  industries  of  the  country  is  returned  by 
the  last  census  at  only  2,738,895  ?  American  workingmen  ought, 
therefore,  to  clearly  understand  (and  as  there  is  no  logic  so  con- 
vincing as  scant  wages  and  restricted  opportunities  for  employ- 
ment, it  is  only  a  question  of  time  when  they  will  understand) 
that  however  it  may  have  been  in  the  past,  when  manufactures 
were  comparatively  few,  now  that  they  are  so  numerous,  if  they 
are  to  be  kept  in  full  operation  they  must  produce  more  than 
the  country  can  possibly  consume.  A  high  tariff,  under  present 
conditions,  tJierefore,  necessarily  means  low  wages.  Undoubtedly 
some,  whose  prejudices  and  interests  will  not  allow  them  to  see 
what  they  do  not  want  to,  may  ridicule  such  a  conclusion.  But 
there  is  no  escape  from  it ;  because  a  high  tariff — under  which 
exemption  from  taxation  is  the  exception — increases  the  cost  of 
all  raw  material,  tools,  and  machinery;  and  to  manufacture 
cheaply,  as  before  pointed  out,  the  capitalist  employer  using 
high-priced  raw  materials,  tools,  and  machinery  must  reduce 
wages,  or  stop  through  limitation  of  his  market.  And  when  the 
masses  of  the  American  people  do  once  understand  this  inevit- 
able drift  and  result  of  our  national  fiscal  policy,  the  tariff,  in- 
stead of  becoming  a  less  important  issue  in  American  politics, 
will  become  the  question  above  all  others  predominant ;  and 
protection  of  the  kind  taught  by  the  Pennsylvania  school  will 
go  down  as  rapidly  as  slavery  before  the  uprising  of  the  people, 
and  perhaps  with  a  convulsion  financial  and  commercial. 

In  no  part  of  the  country  are  opinions  akin  to  those  above 
expressed,  or  an  antagonism  to  the  old-time  notions  about  pro- 
tection, more  rapidly  gaining  ground,  than  in  New  England,  es- 
pecially in  Massachusetts,  as  is  illustrated  by  the  evidence 
respecting  the  condition  of  the  shoe-manufacturing  interests  as 
above  given.  And  when  one  considers  the  special  interests  and 
position  of  New  England,  the  wonder  is  not  that  such  a  change 
in  public  sentiment  is  now  manifesting  itself,  but  rather  that  it 
has  not  come  before.  New  England  has  no  "  raw  materials"  for 
her  manufacturing  industries,  using  the  term  in  the  popular 
sense.  She  has  no  home-supplies  of  coal,  of  the  metals,  of  fibres, 
of  chemicals,  and  of  dye-stuffs,  and  comparatively  little  lumber. 
Nearly  all  of  these  essentials  to  successful  manufacturing  can  be 
obtained  in  many  localities  outside  of  her  borders  cheaper  and 


112  PRACTICAL    ECONOMICS. 

more  readily  than  within  her  territory.  Heretofore  the  skill  and 
intelligence  of  her  people  and  her  comparatively  abundant  capi- 
tal have  been  to  her  a  protection  against  these  disadvantages. 
But  this  protection  is  now  rapidly  disappearing.  There  are  just 
as  good  Yankees  to-day  outside  of  New  England  as  within  New 
England.  They  have  gone  from  her  cold  climate  and  sterile 
soils  to  places  where  the  raw  material  which  they  desire  for 
manufacturing  production  is  cheaper ;  and  they  have  carried 
with  them  their  machinery  arid  the  knowledge  and  ability  nec- 
essary to  make  the  best  use  of  it.  These  emigrants  from  the 
place  of  their  nativity  do  not  propose  to  go  back  to  New  Eng- 
land to  buy  anything,  which  under  the  protection  of  the  cost  of 
transportation  and  cheaper  raw  materials,  they  can  afford  to  pro- 
duce themselves  ;  and  they  mean  to  supply  the  localities  in  which 
they  have  established  themselves — the  South,  the  valley  of  the 
Mississippi,  the  Northwest,  and  the  Pacific  States — with  the  re- 
sults of  their  local  industries  in  these  sections  of  the  country. 
Within  the  past  month  a  wail  has  gone  up  from  New  England 
cotton-manufacturers  that  unless  the  railroads  reduce  their  South 
and  West  bound  freights  they  cannot  compete  in  the  manufacture 
of  the  coarser  cottons  with  other  domestic  competitors  located 
out  of  New  England  ;  and  every  steamship  which  now  sails  out 
of  the  ports  of  Charleston,  Wilmington,  and  Savannah  is  in  no 
small  part  loaded  with  cotton  fabrics  in  place,  as  formerly,  with 
cotton   fibres    exclusively.1      Some   three    years   ago    ex-Gov. 

1  The  following  extract  from  a  recent  number  of  one  of  the  most  ultra  high- 
tariff  journals  of  New  England  (the  Boston  Traveller)  will  be  read  with  interest 
in  connection  with  this  matter: 

*  Tho  cotton  manufacturing  in  the  South  is  as  yet  in  its  infancy,  it  is 
nevertheless  becoming  rapidly  apparent  that  New  England  must  not  be  too  sure 
of  retaining  a  monopoly  of  this  branch  of  manufacture.  A  sharp  competition  al- 
ready exists,  not  only  for  the  trade  in  sheetings  in  the  cotton  States,  but  Southern 
cottons  are  now  entering  the  markets  of  the  Southwestern  States,  and  the  New 
Englander  finds  himself  confronted  in  all  the  leading  markets  of  the  Mississippi 
valley  with  sheetings  and  shirtings  in  no  way  inferior  in  quality  to  those  manu- 
factured by  himself,  and  which  are  offered  at  a  less  price  than  he,  to  make  his 
customary  profit,  can  possibly  afford.  Instead  of  a  possible  competition  twenty- 
five  years  hence,  the  danger  which  threatens  the  New  England  manufacturer  is 

already  imminent The   Southern   mills  are  not  yet  producing  the  finer 

qualities  of  goods,  but,  remembering  the  history  of  the  last  ten  years,  it  is  not  safe 
to  assume  that  with  the  same  machinery  that  is  used  in  the  North  they  will  not 
successfully  do  this  within  the  next  ten  years." 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION, 


Cheney  of  New  Hampshire,  in  an  address  before  a  local  as- 
sociation of  cotton  manufacturers,  called  attention  to  the  fact 
that  when  cotton-mills  now  burn  down  in  New  England  they 
are  not  rebuilt ;  and  at  the  present  time,  it  is  reported,  that, 
with  one  exception  of  an  annex,  there  is  not  a  single  new  foun- 
dation of  a  cotton-mill  now  going  in. 

There  is  much  in  the  present  and  prospective  industrial  and 
commercial  condition  of  this  country  which  is  analogous  to  that 
of  England  just  prior  to  her  decision  to  abandon  the  protective 
policy,  which  she  had  maintained  for  centuries;  and  those  who 
have  the  time  and  opportunity  will  find  much  to  interest  and  in- 
struct in  examining  the  history  of  this  period,  and  especially  the 
speeches  of  Sir  Robert  Peel  in  the  House  of  Commons  and  in  the 
spring  of  1842.  Sir  Robert  Peel,  as  is  well  known,  was  not  one 
of  the  original  English  free-traders,  sympathizing  at  the  out- 
set with  Cobden,  Bright,  and  other  leaders  of  the  new  movement, 
but,  on  the  contrary,  was  personally  in  antagonism  with  them, 
and  a  comparatively  late  convert  to  liberal  commercial  opinions. 
That  the  strong  current  of  public  sentiment  in  opposition  to  the 
further  continuance  of  the  corn-laws,  which  was  then  everywhere 
manifesting  itself  in  England  and  even  threatening  revolution^ 
had  something,  perhaps  very  much,  to  do  with  influencing  his 
opinions  in  respect  to  the  desirability  of  a  change  in  the  long- 
established  fiscal  policy  of  his  country,  may  be  conceded ;  but, 
at  the  same  time,  Sir  Robert  Peel's  whole  life  and  character,  and 
especially  his  subsequent  history,  showed  that  while  he  ever 
knew  how  and  when  as  a  statesman  to  conform  to  expediency, 
he  was  too  much  of  a  man  to  allow  expediency  to  ever  become 
a  permanent  and  predominant  basis  for  his  public  action;  and 
one  therefore  must  seek  for  some  other  motive  in  explanation 
of  his  conduct  in  radically  and  rapidly  abandoning  his  long- 
cherished  protection  opinions  in  the  spring  of  1842,  and  in  the 
undeviating  support  which  he  afterwards  gave  to  the  principles 
of  free  trade.  And  this  motive  is  thus  set  forth  by  his  biog- 
rapher, Thomas  Doubleday,  who,  after  remarking  (see  "  Political 
Life  of  Sir  Robert  Peel,"  vol.  ii.  p.  380)  "that  the  arguments  of 
the  apostles  of  free  trade  had  made  a  deep  impression  upon  the 
mind  of  the  minister,"  goes  on  to  say  that,  "  with  a  population 
then  increasing  at  the  morbid  rate  of  about  a  million  in  the  short 


114  PRACTICAL    ECONOMICS. 

space  of  three  years,  lie  {Sir  Robert  Peel)  had  manifestly  become 
penetrated  with  the  conviction  that  to  find  employment  for  the 
numbers  that  might  in  no  long  time  demand  it,  and  in  a  way  not 
to  be  resisted,  some  large  extension  of  foreign  trade  must  in  some 
way  be  created."  And  Bulwer,  in  his  monograph  of  Peel's  career 
as  a  statesman,  speaks  of  his  being  impressed  with  the  fact, 
which  ought  to  be  also  pregnant,  at  this  time  especially,  with 
meaning  to  the  working  men  and  women  of  the  United  States, 
that  the  wages  of  the  workman  could  not  be  made  liigher  or  more 
remunerative  by  making  his  food  dearer.  In  bringing  forward 
his  scheme  for  recasting  the  British  tariff  in  May,  1842,  Sir 
Robert  Peel  accordingly,  while  greatly  simplifying  the  customs 
acts  by  abandoning  the  duties  on  many  minor  articles,  sought 
more  particularly  to  accomplish,  and  did  accomplish,  first,  the 
cheapening  of  the  living  of  the  British  people  by  abandoning  or 
reducing  the  duties  on  imports  of  food ;  and  secondly,  the 
cheapening  of  the  cost  of  production  to  British  manufacturers 
by  entirely  removing  the  duties  on  drugs  and  dye-stuffs  and 
greatly  diminishing  the  duties  on  the  import  of  many  other 
articles  essential  to  manufacturing.  And  his  great  speech  of 
the  10th  of  May,  1842,  explaining  and  defending  his  new  policy, 
abounds  in  practical  illustrations  which  are  almost  identical 
with  those  which  are  now  to  be  found  in  the  present  commercial 
and  industrial  experience  of  the  United  States.  Thus,  for  ex- 
ample, in  speaking  on  the  subject  of  the  then  British  duties  on 
metals,  he  says : 

"There  is  no  part  of  the  tariff  in  which  we  can  make  more  important 
changes,  than  in  that  which  relates  to  the  reduction  of  duty  on  ores. 
Whether  I  speak  of  iron,  lead,  or  copper,  in  my  opinion  great  advantage 
to  the  commerce  and  manufactures  of  this  country  will  result  from  per- 
mitting the  entry  of  these  important  articles  at  a  much  more  diminished 
rate  of  duty  than  at  present.  Let  me  take  the  case  of  copper.  At  present 
you  cannot  import  and  smelt  foreign  copper  for  internal  use.  You  have 
greater  advantages  than  any  other  country  possesses  with  respect  to  coal, 
and  you  can  apply  that  coal  with  great  advantage  to  the  smelting  of  for- 
eign copper;  but  when  it  is  smelted  you  cannot  make  use  of  it  for  the  pur- 
pose of  home  manufacture,  and  you  send  it  to  France  and  Belgium  to  be 
manufactured.  What  is  the  consequence?  Why,  that  those  foreign  coun- 
tries can  come  into  the  markets  of  Europe,  undersell  you  in  copper,  in 
bolts  for  the  fastening  and  copper  for  the  sheathing  of  ships,  and  in  a 
variety  of  other  articles  made  of  copper  and  brass." 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     11$ 

And  he  then  further  points  out  "  that  as  ships  can  be  fast- 
ened and  coppered  on  the  Continent  at  a  much  cheaper  rate 
than  in  this  country"  (England),  a  very  serious  disadvantage  in 
the  way  of  the  growth  of  British  shipbuilding  had  been  created. 

To  those  familiar  with  the  workings  of  our  existing  tariff 
it  seems  hardly  necessary  to  point  out  that  the  United  States 
in  1883  has  almost  exactly  the  same  experience  in  respect  to 
copper  that  Sir  Robert  Peel  declared  was  proving  so  injurious 
to  Great  Britain  in  1842  ;  that  is,  we  do  not  permit  foreign  ores 
of  copper  to  be  taken  from  Chili  and  other  nations  in  exchange 
for  our  agricultural  implements  and  textiles ;  we  do  not  allow 
such  ores  to  be  smelted  with  our  coal  and  our  labor,  and  in 
fact  have  actually  destroyed  great  smelting  establishments  that 
flourished  before  the  tariff  of  1861 ;  we  have  destroyed  the  ship- 
ping that  formerly  made  such  exchanges,  and  we  give  a  bounty 
to  foreign  competitive  copper-manufacturers  by  so  shielding 
the  proprietors  of  our  rich  mines  from  healthy  competition, 
that  the  latter  regularly  sell  the  excess  of  their  product  over 
domestic  requirement  for  a  lesser  price  in  foreign  countries  than 
they  will  sell  in  their  own  country. 

Again,  on  the  subject  of  oils,  Sir  Robert  Peel,  after  pointing 
out  that  British  manufacturing  industry  was  then  exposed  to 
great  disadvantages  on  account  of  the  high  prices  of  oils,  more 
particularly  spermaceti-oil,  and  that  in  consequence  he  pro- 
posed to  greatly  reduce  the  duties  on  their  importation,  went 
on  to  say : 

"We  shall  then  introduce  the  product  of  the  American  fisheries  in 
competition  with  our  own  fisheries,  and  prevent  the  price  of  oil  in  this 
country  from  reaching  an  extravagant  amount.  I  hope,  sir,  that  I  am  not 
needlessly  detaining  the  House,  but  I  want  to  establish  by  proof  a  position, 
of  the  truth  of  which  I  feel  confident,  that  the  general  result  of  this"  (re- 
duced) "  tariff  will  be  to  give  a  new  life  and  activity  to  commerce  and  to 
make  a  reduction  of  those  charges  which  are  now  incurred  by  residence  in 
this  country.  A  very  short  time  since  the  price  of  spermaceti-oil  in  this 
country  was  from  /60  to  £yo  per  ton,  but  lately  it  had  risen  to  ^95  and 
even  £111  per  ton ;  and  the  manufacturer  who  required  that  oil  had  no 
alternative  but  to  consume  olive  or  other  vegetable  oils  which  did  not 
answer  his  purpose  so  well,  or  pay  an  extravagant  price  as  compared  with 
the  price  of  that  oil  in  the  United  States.  There  are  no  oils  that  can  be 
substituted  for  it  without  disadvantage,  and  yet  we  have  to  carry  on  a 
formidable  rivalry  with  the  United  States  in  some  branches  of  manufac- 


Il6  PRACTICAL    ECONOMICS. 

ture  with  the  disadvantage  of  having  to  pay  8s.  per  gallon  for  oil  which 
in  America  is  sold  for  4s.  per  gallon — a  difference  of  100  per  cent." 

So  much,  then,  for  one  of  the  most  recent  and  most  impor- 
tant phases  of  the  tariff  question.  An  examination  of  it,  such  as 
in  part  has  been  here  given,  ought  to  abundantly  satisfy  us  that 
the  country  has  become  too  big  to  endure  anything  in  the  way 
of  commercial  and  industrial  restrictions  except  such  as  are  ab- 
solutely necessary  for  the  maintenance  of  the  state.  In  fact  the 
people  of  this  country,  more  especially  those  of  New  England, 
would  seem,  from  the  evidence  above  submitted  by  the  repre- 
sentatives of  the  Lynn  shoe  and  other  manufacturing  interests 
to  have  come  to  a  "  parting  of  the  ways"  on  the  question  of 
their  future  tariff  policy.  They  may  decide  in  favor  of  a  con- 
tinuance of  such  a  policy  as  aims  to  protect  their  leading 
manufacturing  interests  by  duly  enhancing  the  cost  of  all  the 
elements  that  enter  into  them,  and  learn  through  costly  experi- 
ence that  such  a  decision  means  the  fiercest  of  domestic  com- 
petition, the  limitation  of  markets,  and  the  restriction  of 
industrial  growth.  Or  they  may  decide  to  favor  a  tariff  which, 
while  primarily  levied  "  for  revenue  only,"  will  at  the  same  time 
discriminate  in  favor  of  and  fully  protect  home  industries  by 
removing  all  unnecessary  obstructions  to  their  extension,  and 
so  gain  for  the  country  such  control  over  the  markets  of  the 
world  as  the  skill  and  intelligence  of  its  people  fully  entitle  them 
to  enter  upon  and  possess. 

In  a  subsequent  article  it  is  proposed  to  ask  attention  to 
other  equally  recent  and  no  less  important  phases  of  the  tariff 
question. 


THE   MOST   RECENT    PHASES    OF   THE   TARIFF 
QUESTION.1 

II. 

IN  the  preceding  number  of  this  Review  (May,  1883)  the 
assertion  was  made  that  our  existing  national  fiscal  or 
economic  policy  was  so  shrivelling  up  the  manufacturing  in- 
dustries and  trade  of  the  country,  and  entailing  so  much  of 
labor  discontent  and  disturbance,  that  nothing  could  long  divert 
the  attention  of  the  people  from  an  earnest  consideration  of  the 
tariff  question,  or  prevent  it  from  coming  to  the  front,  as  a 
political  issue  of  the  first  importance.  In  the  two  months 
which  have  now  elapsed  since  the  article  referred  to  was  written, 
much  evidence  additional  to  that  then  submitted  in  support 
of  this  position  has  accumulated ;  which  in  general  may  be 
summed  up  by  saying,  that  continued  failures,  suspension  of  the 
work  of  production,  and  attempted  reduction  of  wages  on  the 
part  of  manufacturers  ;  strikes  and  resistance  (rarely  successful) 
on  the  part  of  employees ;  with  a  curtailment  of  the  business 
of  the  country,  and  a  reduction  of  profits  on  the  transaction  of 
the  same  to  a  degree  most  unsatisfactory, — have  been  and  are 
now  the  most  noticeable  features  of  the  situation ;  to  which  the 
further  remark  may  be  added,  that  one  must  be  indeed  sanguine 
who  expects  anything  different  in  the  immediate  future,  except 
as  the  result  of  one  of  those  happy  accidents,  or  "  special  provi- 
dences," which  on  occasions  of  difficulty  are  said  to  always  hap- 
pen for  the  relief  of  infants,  drunken  men,  and  the  United 
States."    The  condition  of  one  other  great  domestic  industry, 

1 Princeton  Review,  July,  18S3. 

1  When  the  maximum  of  industrial  depression  and  commercial  disturbance, 
arising  from  production  artificially  stimulated  and  in  excess  of  current  demand, 
is  once  reached,  the  recovery,  in  a  country  situated  as  is  the  United  States,  of 
necessity  commences.     The   marvellous   increase  in  our  population  alone   causes 

117 


118  PRACTICAL   ECONOMICS. 

in  addition  to  those  previously  noticed  in  detail,  namely,  that  of 
the  woollen  manufacture,  is,  however,  worthy  of  special  atten- 
tion. With  the  exception  of  the  manufacture  of  iron  and  steel, 
this  industry,  more  than  any  other,  has  now  been  protected  in 
the  United  States  for  many  years,  by  complex  tariff  provisions 
carefully  devised  for  the  purpose  by  representatives  of  the  in- 
volved interests,  and  subsequently  enacted  without  the  slightest 
regard  to  either  the  interests  of  consumers,  or  of  the  state  in 
respect  to  revenue.  The  result,  so  far  as  the  past  is  concerned^ 
is  that  no  one  of  the  domestic  industries  has  been  more  subject 
to  periods  of  extreme  fluctuation,  or  has  paid  so  small  an  ave- 
rage profit  on  the  total  capital  invested,  as  has  the  woollen  and 
worsted  manufacture  of  this  country  since  the  enactment  of  the 
wool  tariff  of  1867  ;  while,  in  regard  to  the  present,  there  is  almost 
ho  divergence  of  opinion  "  among  the  trade"  that  the  woollen 
machinery  and  the  production  of  woollens  in  the  United  States 
is  very  far  in  excess  of  any  existing  market  requirements.  In- 
deed, the  estimate  of  some  who  assume  to  be  qualified  to  speak 
is  "  that  not  over  fifty  per  cent  of  the  domestic  manufacture  of 
spring  clothing  and  woollens  for  the  seasons  of  1882  and  1883 
has  really  passed  into  consumption."  It  has,  therefore,  followed 
(to  quote  from  a  leading  commercial  review  under  date  of 
June  6,  1883). 

"  that  a  heavy  capital  is  locked  up  in  old  stock  carried  by  clothiers  and 
cloth  jobbers,  and  that  the  spring  clothing  lately  sold  by  the  former  has 
been  forced  on  the  market  at  less  than  the  actual  cost  of  manufacture." 

consumption  to  rapidly  gain,  upon  production  under  such  circumstances;  until 
finally  the  community  all  at  once  realizes  that  supply  has  become  unequal  to  the 
demand.  Then  those  of  the  producers  who  have  been  able  to  keep  their  heads 
above  water  during  the  period  of  depression  enjoy  another  season  of  remarkable 
prosperity;  when  others  again  rush  into  business  in  excess  of  any  need,  and  the 
old  experience  is  again  repeated.  Such  has  been  the  history  of  the  industry  of 
the  country  for  the  last  twenty  years  under  the  influence  of  a  high  protective  tariff, 
and  such  is  most  noticeably  its  present  experience.  To  use  a  familiar  expres- 
sion, it  is  always  "  either  high  water  or  low  water"  with  the  business  of  the 
United  States:  no  middle  course  and  no  stability.  What  the  people  gain  as  con- 
sumers at  one  time  from  low  prices  they  more  than  compensate  at  another  by 
the  recurrence  of  extreme  rates;  and  as  producers,  by  periodic  suspension  of  in 
dustry,  reduction  of  wages,  and  depression  of  business.  Meanwhile  the  loss  to 
the  country  from  the  destruction  of  capital  and  the  waste  and  misapplication  of 
labor  is  something  which  no  man  can  estimate. 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.    1 19 

Under  such  circumstances  the  woollen  manufacturers  of  the 
United  States,  generally  recognizing  that  there  is  to  them  no 
other  prudent  alternative  to  producing  without  orders,  or  at  the 
best  at  infinitesimal  profits,  but  to  suspend  operations,  have  be- 
gun to  adopt  this  latter  policy  ;  and  a  very  large  number  of  wool- 
len-mills are  already  closed  (nearly  800  sets  of  machinery  re- 
ported idle,  July  1),  or  working  upon  reduced  time,  and  the  pro- 
gress of  events  is  making  it  every  day  less  and  less  a  matter  of 
choice  to  the  manufacturer  as  to  what  course  he  will  take. 

So  much,  then,  for  one  phase  of  the  tariff  question  indicative 
of  influences  that  are  irresistibly  working  to  compel  changes  in 
popular  sentiment  and  a  new  "  crystallization  of  political  forces  " 
on  this  subject. 

Consideration  is  next  asked  to  another  phase  of  this  question, 
which  developed  itself  more  conspicuously  during  the  last  ses- 
sion of  Congress  than  ever  before ;  namely,  the  antagonism  of 
different  interests  under  the  protective  policy — an  antagonism 
that  bids  fair  to  evolve  more  of  bitterness  and  hatred  than  has 
ever  been  manifested  by  protectionists  as  a  whole  against  the 
free-traders  ;  which  from  the  necessity  of  the  case  must  con- 
tinue to  intensify ;  and  which  sooner  or  later  will  divide  the 
protective  party  into  hostile  factions,  and  inevitably  wreck  the 
whole  system  which  it  advocates.1 

It  is  evident  that  the  representatives  of  many  branches  of 
domestic  manufactures,  more  especially  those  engaged  in  the 
higher  forms  of  production,  are  beginning  to  feel  that  their  pros- 
perity and  even  industrial  existence  is  dependent  upon  a  cheaper 


1  That  this  statement  is  fully  warranted,  attention  is  asked  to  the  following 
extract  from  a  letter  reviewing  the  tariff  legislation  of  the  Forty-seventh  Congress 
written  by  Senator  John  Sherman  to  the  Commercial-Gazette  of  Cincinnati.  He 
says  : 

"When  the  bill  was  reported  to  the  Senate  it  was  met  by  two  kinds  of  oppo- 
sition— one  the  blind  party  opposition  of  Democratic  free-traders;  the  other 
(much  more  dangerous)  the  conflict  of  selfish  and  local  interests,  mainly  on  the 
part  of  manufacturers  who  regarded  all  articles  which  they  purchased,  as  raw 
material,  on  which  they  wished  the  lowest  possible  rate  of  duty  ;  and  their  work 
as  the  finished  article,  on  which  they  wished  the  highest  rate  of  duty.  In  other 
words,  what  they  wanted  to  buy  they  called  raw  material,  and  what  they  wanted 
to  sell  they  wanted  protected.  It  was  a  combination  of  the  two  kinds  of  opposi- 
tion that  made  the  trouble." 


120  PRACTICAL    ECONOMICS. 

and  better  supply  of  their  raw  or  crude  materials,  through  a 
reduction  or  entire  abrogation  of  the  tariff  taxes  on  the  importa- 
tion of  such  articles.  That  the  attainment  of  such  a  result  is 
most  important  to  New  England  has  already  been  pointed  out. 

But  upon  what  principle  of  equity  or  consistency  is  protection 
through  the  agency  of  the  tariff  to  be  given  to  those  who  manu- 
facture machinery,  tools,  hardware,  and  cutlery  out  of  crude 
iron  and  steel,  or  who  spin  and  weave  wool,  and  the  fibres  of 
flax  into  cloth,  and  to  be  denied  to  the  ore-miner,  the  iron  smelter 
and  forger,  and  the  wool  and  flax  grower  ?  Is  not  the  laborer  as 
much  entitled  to  have  the  state  protect  him  against  the  com- 
petition of  the  so-called  pauper  labor  of  Europe  in  the  one  case 
as  in  the  other?  It  seems  almost  needless  to  say  that  no  answer 
in  favor  of  such  discrimination  can  be  given  that  does  not  involve 
inconsistency  and  inequity.  Nevertheless  such  discrimination 
in  the  levying  of  duties  under  the  tariff  has  got  to  be  made, 
if  extended  markets  for  our  manufactured  products  are  to  be 
obtained  through  cheaper  production.  And  the  inevitable 
alternative  in  default  of  such  discrimination  is,  that  our  indus- 
trial growth,  and  the  sphere  of  opportunity  for  the  employment 
of  manufacturing  labor,  will  be  restricted  to  the  comparatively 
limited  and  (in  view  of  our  capacities)  wholly  inadequate 
demands  of  an  almost  exclusively  home  market ;  with  a  con- 
tinued threat  of  business  stagnation  through  excessive  produc- 
tion to  employers,  and  of  reduction  of  wages  to  the  employees. 

Among  the  many  illustrations  which  might  be  adduced  in 
proof  of  the  inevitable  antagonism  of  protected  interests  that  is, 
and  is  to  be ;  and  how  unquestionably  protection  destroys  pro- 
tection under  a  system  like  that  now  recognized  in  the  United 
States,  which  attempts  to  protect  every  manufacturing  industry, 
— the  following,  derived  from  the  records  of  the  Federal  House 
of  Representatives  at  the  last  session  of  Congress,  is  among  the 
most  curious  and  instructive. 

The  glass-bottle  manufacturing  interest,  comparatively  one 
of  the  smallest  industries  in  the  United  States,  and  enjoying  a 
protective  duty  on  competitive  imports  of  35  per  cent,  asked  to 
have  this  protection  increased  to  such  an  extent  that  it  would 
amount  to  near  100  per  centum  ad  valorem.  The  representa- 
tives of  this  industry  were,  however,  too  wise  to  propose  that 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.    121 

any  such  increase  should  be  incorporated  into  the  statute  in 
language  sufficiently  clear  to  be  readily  understood — the  day 
for  the  enactment  of  ioo-per-cent  duties  plain  and  simple,  on 
the  importation  of  articles  of  common  use,  having  obviously 
passed  ;  and  they  therefore,  with  a  seeming  absence  of  all  guile, 
merely  asked  that  specific  rates  be  substituted  for  ad  valorem, 
and  fixed  at  \\  cents  per  pound;  the  relative  ad  valorem  of 
which  none  but  experts  could  understand.  But  in  opposition 
to  this  change  appeared,  some  little  time  afterwards,  the  repre- 
sentatives of  the  great  brewing  interest  of  the  United  States — 
employing  a  capital  of  $91,208,000,  while  the  whole  common 
glass  manufacture,  a  small  proportion  of  which  only  is  engaged 
in  the  manufacture  of  bottles,  represents  but  $19,844,000  of  in- 
vested capital*;  and  in  the  course  of  the  debate  which  ensued 
on  the  proposition  to  amend  the  tariff  on  bottles  the  following 
statements  were  submitted : 

1st.  That  the  proposed  increase  in  duties  would  increase  the 
price  of  beer-bottles  to  the  extent  of  $2.13  per  gross,  and  the 
cost  of  bottling  to  the  extent  of  $14,807.86  for  every  6000 
barrels  so  treated  ;  and  that  as  there  are  brewers — individuals  or 
firms — in  the  United  States  who  now  bottle  over  100,000  barrels 
of  beer  annually,  such  manufacturers  would,  in  the  interest  of 
the  bottle-makers,  be  subject  in  consequence  to  a  tax,  in  addi- 
tion to  what  they  now  pay,  of  near  $250,000  per  annum.  2d. 
That  the  business  of  manufacturing  beer — "  ales"  and  "  lagers" — 
in  the  United  States  has  within  recent  years  grown  to  enormous 
proportions  ;  that  the  products  of  such  manufacture  are  now 
beginning  to  be  exported  with  success  to  Mexico,  South  America, 
Australia,  and  even  to  Europe ;  and  that  they  can  be  exported 
safely  only  in  bottles.  3d.  That  the  increase  of  the  tariff  taxa- 
tion on  bottles  to  the  extent  asked  by  the  bottle  manufacturers, 
would  tend  to  entirely  break  up  and  destroy  this  export  busi- 
ness. And  as  evidence  on  this  point  a  letter  was  submitted 
from  the  president  of  a  single  brewing  association  in  Missouri, 
claiming  to  employ  more  labor  and  capital  than  any  five  bottle- 
making  establishments  in  the  United  States,  of  which  the  follow- 
ing is  an  extract : 

"While  the  present  high  duty  of  35  percent  ad  valorem  is  a  great  im- 
pediment to  the  exportation  of  American  bottled  beer,  we  have  neverthe- 


122  PRACTICAL    ECONOMICS. 

less  managed  to  compete  with  some  success  with  Europe  for  the  trade  of 
Mexico,  Central  America,  Sandwich  Islands,  and  parts  of  Brazil  and  Au- 
stralia, and  the  demand  for  the  better  American  brands  is  constantly  in- 
creasing. If  there  was  no  duty  at  all  on  bottles,  as  should  be  the  case, 
nearly  the  entire  trade  of  the  countries  named,  which  is  considerable, 
could  be  diverted  to  the  United  States,  where  it  properly  belongs.  We 
have  now  to  contend  against  this  drawback  of  higher  bottles  than  the  Eu- 
ropean bottler  pays.  But  a  prohibitory  tariff  of  \\  cents  per  pound  would 
result  in  driving  out  all  American  competition  from  such  foreign  lands 
and  damage  the  trade  immensely." 

Here,  then,  was  clearly  a  case  in  which  not  to  discriminate  in 
the  imposition  of  duties  in  respect  to  different  manufactures,  and 
not  to  deny,  in  the  specific  instance  cited,  the  demands  for  any 
additional  protection,  was  to  militate  against  the  extension  and 
prosperity  of  one  of  the  largest  branches  of  our  domestic  indus- 
try ;  against  a  most  promising  but  incipient  extension  of  our 
foreign  commerce,  and  in  favor  of  a  restricted  market  for  one 
of  the  leading  products  (barley)  of  our  agriculture. 

In* the  debate  which  took  place  on  this  proposition  to  in- 
crease the  duties  on  bottles  the  members  of  the  House  of  Rep- 
resentatives did  not  fail  to  see  the  importance  of  the  point 
involved,  and  accordingly,  in  two  successive  votes,  viva  voce  and 
by  tellers,  refused  to  increase  the  rates;  but  in  the  juggle  of  the 
Committee  of  Conference  the  duty  on  bottles  notwithstanding, 
came  out  at  I  cent  per  pound,  in  place  of  the  former  rate  of  35 
per  cent  ad  valorem,  or  was  increased  nearly  100  per  cent; 
and  in  the  closing  hours  of  the  session,  and  with  the  cognizance 
of  only  a  very  few  members,  the  change  was  enacted  into  law. 

Representatives  of  the  Western  beef  and  pork  packing  inter- 
ests also  appeared  before  Congress  at  its  last  session,  and  pro- 
tested against  further  discriminations  in  the  levying  of  duties 
on  imported  salt,  whereby  benefits  extended  to  the  packers  and 
curers  of  fish  in  the  Eastern  sections  of  the  country  are  not 
equally  given  to  the  packers  and  curers  of  meats  at  the  West. 
This  petition  or  remonstrance  was  almost  unnoticed,  but  it  is 
nevertheless  worth  while  to  note  how  they  presented  their 
case.  After  calling  attention  to  the  fact  that  during  the  year 
1881,  133,024,447  pounds  of  foreign  salt  paid  no  revenue  to  the 
government,  it  having  been  withdrawn  from  bond  in  accordance 
with  a  provision  of  the  act  of  1866  that  all  salt  used  in  the  cur- 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.    1 23 

ing  of  fish  shall  be  exempt  from  duty, — the  assumption  being 
that  much  of  the  fish  thus  cured  is  sent  to  a  foreign  market, 
where  it  competes  with  similar  productions  of  those  countries, — 
the  petitioners  go  on  to  say : 

"  The  same  argument"  {i.e.,  in  favor  of  those  who  cure  fish)  "can  be  ad- 
vanced in  favor  of  the  people  of  the  balance  of  our  country  who  continue 
to  pay  duties  on  salt,  for  in  the  West  and  South  large  quantities  of  pork, 
beef,  and  other  products  are  annually  cured  with  salt  and  sent  to  foreign 
countries  for  a  market,  and  are  sold  in  competition  with  similar  articles  of 
other  countries.  Why,  therefore,  should  the  products  of  one  section  of 
the  country  be  thus  discriminated  against,  and  those  of  another  section  be 
encouraged  and  protected  ?     Is  this  equity?  is  it  justice  ?" 

The  curious  state  of  things  brought  to  light  by  the  petition 
presented  to  Congress  at  its  last  session  by  the  Harrison  Wire 
Company  of  St.  Louis  ought  also  not  to  be  passed  unnoticed 
in  this  exposition  of  newly  developing  tariff  antagonisms.  In 
this  petition  it  was  represented  that  the  company  named  was 
encraored  in  the  State  of  Missouri  in  the  manufacture  of  wire  for 
fencing  purposes ;  that  their  business  was  rapidly  increasing  in 
volume,  creating  new  and  extensive  opportunities  for  the  em- 
ployment of  labor;  and  that  their  present  production  of  wire 
was  nearly  one  hundred  tons  per  day.  It  was  further  repre- 
sented that  the  wire  thus  produced  is  manufactured  from  soft 
steel,  known  to  the  trade  as  the  Bessemer  product ;  but  that, 
owing  to  the  high  price  charged  for  this  latter  in  this  country, 
the  company  had  hitherto  been  compelled,  to  purchase  their 
supplies  in  Europe;  that  recently  it  had  been  discovered  that 
ores  out  of  which  such  steel  could  be  easily  and  profitably  pro- 
duced by  the  so-called  u  basic  process"  existed  in  large  quanti- 
ties in  Missouri,  Alabama,  and  Tennessee;  and  that  to  take 
advantage  of  such  discovery  the  aid  of  foreign  capital  had 
been  sought  and  obtained.  That  the  assignment  of  the  right 
to  use  the  basic  process  had  been  also  obtained  from  the 
apparent  owner  thereof,  and  that  suitable  works,  involving  an 
ultimate  expenditure  of  five  millions  of  dollars,  had  been 
commenced,  and  would  have  been  now  completed,  but  for 
legal  proceedings  instigated  by  the  American  Bessemer  Steel 
Company,  avowedly  for  the  purpose  of  preventing  the  Har- 
rison Wire  Company  from  proceeding  with  their  new  enter- 


I24  PRACTICAL    ECONOMICS. 

prise,  and  for  the  purpose  of  enabling  the  former  company  "  to 
keep  up  the  price  of  its  products"  and  "  monopolize  the  iron  and 
steel  business  interests  of  the  country."  It  was  also  set  forth 
in  the  petition,  that  the  interference  of  the  Bessemer  Company 
was  based  on  a  claim  to  have  patents  on  this  basic  process,  but 
which  process  the  Bessemer  Company  had  not  only  never  used 
and  did  not  desire  to  use,  but  also  did  not  propose  to  allow  any 
one  else  to  use  outside  of  their  own  organization  ;  and  further, 
that  a  suit  commenced  by  the  "  Bessemer"  against  the  "  Harri- 
son" Company  for  an  infringement  of  patents  was  a  pretence,  in- 
asmuch as,  if  the  former  did  really  own  the  patents  (which  is 
disputed),  there  could  be  no  actual  infringement  so  long  as  the 
new  steel-works  were  incomplete  and  had  not  commenced 
operations.  "  And  thus  it  is,"  continues  the  petition,  "that 
Congress  prevents  foreign  importation  by  a  protective  tariff, 
and  the  patent-laws  enable  the  Bessemer  Company  to  prevent 
all  new  competitive  enterprises  in  this  country. "  The  Harrison 
Company  therefore  prayed  Congress  for  relief ;  to  wit,  by  so 
amending  the  tariff  "  as  to  prohibit  the  joint  purchase  by  corpo- 
rations of  any  patent  for  reducing  iron-ore,  as  an  act  contrary 
to  public  policy;"  and  also,  "that  if  any  such  patent  be  now 
owned  under  any  purchase  or  pretended  purchase,"  such  owner 
shall  "  be  compelled  to  license  all  who  desire  to  convert  such 
ores  at  a  reasonable  price."  And  "  if  they  neglect  or  refuse"  so 
to  do,  they  shall  forfeit  all  rights  under  any  patent,  either  foreign 
or  domestic."  When  this  petition  was  first  introduced,  it  was 
no  secret  at  Washington  that  its  object  was  to  force  the  Besse- 
mer Company  (mainly  a  Pennsylvania  interest)  to  abandon  its 
"  dog-in-the-manger"  policy  in  respect  to  the  Harrison  Company 
and  other  domestic  manufacturers,  through  a  threat  of  serious 
tariff  defection  and  revolt  on  the  part  of  Western  producers ;  and 
that  the  political  influence  of  the  family  of  the  president  of  the 
Harrison  Company  was  also  to  be  invoked  for  the  same  end.  But 
be  this  as  it  may,  as  the  petition  after  presentation  was  not  made 
the  basis  of  any  attempted  legislative  action,  it  is  probable  that 
the  object  sought  for  was  accomplished  in  another  but  not  less 
effective  manner. 

Again,  in  further  illustration  of  the  bitterness  of  feeling  that 
the  policy  of  protection  is  certain  to  provoke  among  the  ranks 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     1 25 

of  the  protectionists,  it  is  interesting  to  note  that  one  of  the 
most  bitter,  almost  ferocious,  exhibits  of  personal  feeling  that 
has  ever  been  displayed  during  the  whole  twenty  years  of  the 
present  tariff  controversy  was  embodied  in  a  pamphlet  distribu- 
ted to  Congress  at  its  last  session  ;  in  which  Mr.  Joseph  Wharton, 
manufacturer  of  nickel  in  Pennsylvania,  and  a  protectionist,  at- 
tacked certain  Connecticut  plated-ware  manufacturers,  and  the 
members  of  the  Senate  of  the  United  States  from  Connecticut, 
all  also  and  alike  protectionists,  because  the  latter  desired  and 
advocated  a  reduction  of  duties  on  nickel,  which  is  a  crude  and  raw 
material  in  the  manufacture  of  plated  ware,  but  which  the  former 
desired  to  produce,  and  through  the  maintenance  of  high  duties 
to  also  monopolize  and  control  the  American  market.  And  as  a 
specimen  of  this  personal  feeling,  and  also  of  the  unity  that  pre- 
vails among  these  brothers  in  selfishness, — for  self-interest  and  no 
other  motive  is  the  only  ground  of  difference  between  the  man 
who  wants  to  make  and  monopolize,  and  the  men  who  want  to 
use  nickel,  as  to  how  the  government  shall  interfere  in  the  mat- 
ter,— the  following  extracts  from  Mr.  Wharton's  pamphlet  are 
here  quoted : 

"Senator  Piatt's  constituents  have  nickel-ore  quite  similar  to  mine,  and 
in  apparent  abundance,  within  a  few  miles  of  their  German-silver  works  at 
Torrington,  at  Litchfield,  and  probably  at  other  places  in  the  Naugatuck 
Valley.  That  Torrington  ore  was  never  successfully  worked  in  Connecti- 
cut, whether  because  the  brass  and  German-silver  business  paid  the  canny 
wooden-nutmeg  men  better,  or  whether  their  consciences  forbade  them  to 
bloat  themselves  with  the  ungodly  profits  of  the  nickel  manufacturer,  his- 
tory does  not  inform  us.     Let  us  believe  it  was  piety." 

And  again: 

"It  is  pitiful  to  think  that  the  industries  of  our  country  should  be  at 
the  mercy  of  legislators,  some  of  whom  are  actually  hostile  and  many  of 
whom  are  so  ignorant ;  to  think  that  any  lie  of  the  busy  agents  of  our 
national  industrial  enemies — mostly  small  barking  creatures — should  be 
believed,  even  when  not  understood,  and  that  the  statements  of  a  fellow- 
citizen  of  known  respectability  should  be  disbelieved  and  cheapened, 
simply  because  he  is  a  fellow-citizen.  It  would  be  ludicrous  if  it  were  not 
lamentable  to  think  that  a  tree  bearing  good  fruit  should  be  cut  down  by  leg- 
islators" {i.e.,  the  Senators  from  Connecticut)  "  who  know  little  more  about 

the  subject  than  a  cow  knows  about  Sunday I  have  supported  and 

aided  the  government  more  than  it  has  supported  and  aided  me.     I  am 


126  PRACTICAL    ECONOMICS. 

one  of  the  men  who  create  and  maintain  the  prosperity  of  the  nation,  and 
who  enable  it  to  survive  even  the  affliction  of  wrong-headed  and  cranky 
legislators.  We  are  the  toiling  oxen  who  make  the  nation's  harvests,  not- 
withstanding the  gadflies." 

1  Readers  curious  to  know  what  was  said  on  the  other  side  by  the  "spoon- 
makers"  of  Connecticut  and  certain  "  actually  hostile"  and  "  so  ignorant"  legis- 
lators who  spoke  for  them,  will  obtain  this  information  from  the  following  official 
report  of  a  debate  in  the  Senate  of  the  United  States,  January  29,  1883;  the  sub- 
ject under  consideration  being  the  duties  on  nickel: 

"Mr.  Platt.  Mr.  President,  nickel  under*  the  present  law  in  the  ore  is  30 
cents  per  pound,  and  nickel  alloys  are  20  cents  per  pound.  Either  duty  is  practi- 
cally prohibitory.  A  single  establishment  in  Connecticut  uses  of  nickel  annually 
three  times  the  amount  that  has  been  imported  into  this  country. 

"  Mr.  Ingalls.     Where  is  it  mined  in  this  country  ? 

••  Mr.  Platt.  It  is  mined  in  one  single  mine  near  Lancaster,  Pennsylvania,  I 
think.  When  this  duty  was  imposed  of  30  cents  on  the  ore  and  20  cents  on  the 
alloy,  nickel  was  worth  from  $2  to  $2.50  or  $2.75  a  pound.  A  duty  of  15  cents  a 
pound  to-day  would  be  a  higher  ad-valorem  duty  than  that  imposed  -when  nickel 
was  from  $2  to  $2.75  a  pound  and  the  duty  was  really  20  cents  per  pound  on  the 
alloy. 

"All  this  nickel,  or  three  quarters  of  it,  is  consumed  in  Connecticut  for  the 
manufacture  of  German  silver. 

"  It  is  said  that  this  nickel  mine  is  closed.  It  is  simply  closed  not  because  it 
does  not  pay,  but  because  at  the  present  time  there  happens  to  be  an  overpro- 
duction, and  the  owner  of  it  will  not  reduce  the  price.  The  price  at  the  present 
time  is  about  $1  to  $1.05  a  pound.  It  can  be  produced — I  do  not  make  this  state- 
ment from  my  own  knowledge,  but  I  make  it  from  representations  made  to  me 
by  persons  who  I  think  are  entirely  familiar  with  the  subject — it  can  be  produced 
in  this  country  as  cheap  as  it  can  abroad,  owing  to  the  fact  that  this  ore  here  is 
more  easily  refined. 

"  Mr.  Bayard.     What  is  the  foreign  price? 

"  Mr.  Platt.  The  foreign  price  is  somewhere  in  the  neighborhood  of  70  cents 
at  the  present  time.  I  believe  that  15  cents  per  pound  is  more  than  a  fair  pro- 
tective duty  to  the  gentleman  who  produces  this  nickel.  Certainly  my  constitu- 
ents are  very  greatly  interested  in  not  having  so  high  a  rate  of  duty  placed  upon 
it  as  to  unnecessarily  enhance  the  cost  of  the  article  which  they  manufacture,  and 
which  is  then  taken  in  its  third  stage  and  worked  into  articles  which  go  all  over 
the  country. 

"  Mr.  Sewell.  I  would  ask  the  Senator  from  Connecticut  if  the  manufacture 
of  this  article  in  this  country  has  not  reduced  the  price  of  the  foreign  article  very 
largely  ? 

"Mr.  Platt.  The  producer  of  nickel  in  this  country  produced  nickel  for  a 
number  of  years  at  50  cents,  or  from  50  to  70  cents  a  pound.  He  sold  it  from  $2 
to  $2.50  and  as  high  as  $3  a  pound,  because  there  was  a  scarcity  of  it  in  the  whole 
world.  Recently  a  mine  has  been  opened  in  New  Caledonia  which  produces  large 
quantities  of  nickel,  and  has  thereby  forced  him  to  reduce  the  price,  but  I  still 
believe  he  makes  100  per  cent  on  every  pound  of  nickel  he  produces. 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     \2J 

It  needs  no  gift  of  prophecy,  therefore,  to  foretell  what  will 
happen  if,  with  a  view  of  promoting  the  interests  of  the  greater 
industries  of  the  country — those  which  employ  the  largest 
amounts  of  capital  and  the  largest  number  of  laborers — the  old 
policy  of  attempting  to  protect  everything  is  in  any  degree  to  be 
abandoned.  It  cannot  fail  to  provoke  the  most  violent  antago- 
nisms. And,  to  borrow  an  illustration  from  old  ^Esop,  if  any  of 
the  smaller  protection  monkeys  should  have  their  tails  cut  off — 
a  work  of  necessity,  if  genuine  protection  of  American  industry 
by  removal  of  burdens  is  ever  to  be  entered  upon — we  may  be 
sure  that  those  experiencing  such  misfortune  will  be  the  most 
clamorous  for  the  subjection  of  all  the  other  monkeys  to  a  like 
operation.  For  example,  when  the  Senate  at  its  last  session,  in 
recognition  of  a  general  and  favorable  public  sentiment,  largely 
reduced  the  duties  on  lumber,  the  indignation  at  such  action, 
expressed  both  by  action  and  word  by  at  least  one  Senator 
specially  representing  the  lumber  interests,  was  almost  ludicrous  ; 
and  notice  was  promptly  served  that  unless  such  vote  was  re- 
scinded active  opposition  would  be  made  to  the  whole  protec- 
tive system,  and  more  particularly  to  the  maintenance  of  those 
duties  in  which  New  England  was  known  to  be  specially  in- 
terested. And  before  such  threat,  which  would  otherwise  have 
undoubtedly  been  executed,  the  duties  taken  off  pine  lumber  in 
the  first  instance  were  substantially  restored,  nearly  every  Sena- 
tor from  New  England  concurring.  When  the  writer  subse- 
quently asked  a  Senator  whose  views,  privately  expressed,  were 
in  favor  of  the  abolition  of  al!  duties  upon  lumber,  why  he  voted' 
for  the  retention  of  the  duties,  he  received  this  reply:  "It  is 


"  Mr.  Sewell.  Does  the  Senator  from  Connecticut  say  that  the  price  of  nickel 
is  75  cents  a  pound  ? 

"  Mr.  Platt.     That  is  stated  by  those  persons  who  consume  it. 

"Mr.  Sewell.     Mere  hearsay. 

*'  Mr.  Platt.  It  is  not  mere  hearsay.  There  are  eleven  establishments  in 
Connecticut  engaged  in  the  manufacture  of  German  silver,  all  of  whom  depend 
upon  this  producer  for  the  nickel.  He  has  practically  the  control  of  the  market 
in  this  country.  They  are  very  intelligent  men;  they  are  men  who  have  exam- 
ined this  matter  with  the  greatest  care,  and  it  is  their  statement  that  I  make  when 
I  say  that  I  believe  Mr.  Wharton  can  produce  nickel  at  50  cents  a  pound.  I  have 
never  seen  it  denied  by  him.  The  statement  has  been  made  over  and  over  again, 
and  I  do  not  think  they  intend  to  misrepresent  him." 


128  PRACTICAL    ECONOMICS. 

of  no  use  for  you  to  ask  me  this  question.  Without  such  a 
change  of  votes  the  interests  of  New  England  would  have  been 
slaughtered."  But  how  unsatisfactory  must  be  the  industry  of 
the  country,  or  any  section  of  it,  whose  prosperity  depends  upon 
the  accidents  of  votes  under  such  influences! 

There  are  certain  phases  also  of  the  tariff,  or  more  precisely 
of  the  protective  policy,  involved  in  the  so-called  "  silver  ques- 
tion," which  have  not  heretofore  been  generally  recognized,  but 
which  it  is  well  not  to  overlook  in  prospecting  the  future  course 
of  events — economic  and  political — in  the  United  States.  Not- 
withstanding all  pretences  and  assertions  to  the  contrary,  the 
compulsory  obligation  imposed  some  years  since  by  legislation 
on  the  Federal  Treasury,  and  still  continued,  to  purchase  and  coin 
silver,  in  disregard  of  any  necessities  or  requirements  of  the 
business  of  the  country,  was  never  in  any  sense  entitled  to  be 
regarded  as  a  measure  in  the  interest  of  the  currency  or  of  the 
bi-metallic  problem,  but  on  the  other  hand  was  from  the  very 
outset  a  measure  of  protection,  pure  and  simple,  for  the  benefit 
of  a  special  industry,  tho  not  in  the  usual  form  of  a  tariff 
enactment.  Thus,  with  the  reduction  in  the  world's  price  for 
silver  bullion  consequent  on  the  world's  increased  product 
of  silver,  and  the  disinclination  everywhere  manifested  in  all 
countries  of  high  civilization  and  prices  to  use  silver  coinage, 
as  too  bulky  and  inconvenient  for  effecting  exchanges,  it  be- 
came evident  to  the  owners  of  silver-mines  in  the  Southwest 
and  on  the  Pacific  that  the  market  for  their  products  was  likely 
to  be  less  profitable  and  certain  than  it  would  have  been,  had 
the  old-time  condition  of  affairs  remained  unaltered.  And 
with  the  precedent  and  experience  of  legislation  avowedly 
for  protection  under  the  tariff  before  them,  what  more  natural 
than  that  the  representatives  of  silver-mining  should  not  only 
seek,  but  demand  as  a  right,  that  government  should  inter- 
fere, and  by  means  of  additional  taxation  upon  all  other  pursuits 
and  industries  of  the  country,  make  profitable  to  them  a  busi- 
ness which  natural  circumstances  were  tending  to  make  less 
profitable  or  possibly  wholly  unremunerative.  As  tariff  restric- 
tions could  not,  however,  help  in  this  matter;  as  the  price  for 
silver  throughout  the  world  was  irrespective  of  any  question  as 
to  whether  the  labor  entering  into  its  production  was  "  pauper" 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     1 29 

or  affluent ;  and  as  legislation  in  favor  of  an  annual  bounty  of 
some  twenty-four  millions  to  be  paid  directly  from  the  Federal 
Treasury  to  the  silver  producers  was  not  likely  to  find  favor  with 
the  public,  the  solution  of  the  problem  involved  might  have 
seemed  at  the  outset  to  be  not  a  little  difficult.  But  happily 
and  ingeniously  all  difficulties  were  overcome  by  apparently 
transferring  the  issue  from  the  domain  of  protection  and  boun- 
ties to  that  of  the  currency,  and  this  was  accomplished  by  alleg- 
ing that  the  people  were  suffering  from  an  insufficiency  of  silver 
coinage  ;  that  the  "  gold-bugs,"  speculators  and  monopolists  were 
everywhere  hostile  to  the  circulation  of  silver;  that  the  honor  of 
the  country  required  that  the  "  dollar  of  the  fathers"  demoral- 
ized by  a  trick  should  be  reinstated  in  its  former  position ;  and 
finally  that  the  solution  of  the  vexed  problem  of  bi-metalism 
would  be  greatly  aided  if  the  Federal  Government  would  large- 
ly increase  its  coinage  of  silver  and  lend  all  its  influence  to  force 
the  same  into  circulation.  And  under  such  circumstances  and 
pretences  it  was  not  difficult  for  the  silver-mine  interests  to  obtain 
a  large  measure  of  protection,  by  creating  an  extraordinary  and 
wholly  artificial  but  nevertheless  a  certain  large  additional  mar- 
ket for  their  products,  through  an  enactment  that  the  Federal 
Treasury  should  regularly  buy  silver  bullion,  irrespective  of 
all  circumstances,  to  the  extent  of  two  millions  of  dollars  per 
month,  or  twenty-four  millions  pe.'  annum,  as  a  minimum. 
That  the  reasons  put  forth  for  the  enactment  of  such  a  law 
were  pretences  and  shams,  as  asserted,  is  made  evident  from  the 
circumstances  that  now  that  the  people  have  got  all  the  "  dollars 
of  the  fathers"  in  circulation  that  they  want ;  now  that  silver 
bullion  and  dollars  are  rapidly  accumulating  in  the  national 
treasury  and  remaining  unused  simply  because  no  one  wants 
anymore  of  such  material  for  currency  ($61, 000,000  of  silver 
bullion,  coined  dollars  and  fractional  currency  being  reported  on 
hand  June  1st,  1883);  now  that  it  is  admitted  that  the  existing 
coinage  policy  of  the  United  States  instead  of  aiding  is  greatly 
complicating  and  delaying  the  settlement  of  the  bi-metallic  cur- 
rency problem  ;  now,  in  short,  that  every  object  for  which  the 
coinage  act  of  1877  was  ostensibly  passed  has  been  either  ac- 
complished or  proved  to  be  beyond  the  province  of  legislation, 
the  very  men  who  were  most  anxious  for  the  original  enactment 


o*- 


130  PRACTICAL    ECONOMICS. 

of  the  law  are  now  most  opposed  to  its  repeal.  And  it  ought  to 
be  further  understood  that  the  real  reason  why  Congress  refused 
at  the  last  session  to  give  heed  to  an  almost  general  sentiment 
among  business  men  that  the  further  coinage  and  accumulation 
of  silver  by  the  Treasury  should  be  stopped,  was  the  open  threat 
or  intimation  on  the  part  of  the  Senators  and  Representatives 
of  the  silver-producing  States,  that  in  case  of  such  action  their 
support  and  votes  could  no  longer  be  relied  on  for  the  mainte- 
nance of  continued  high  duties  under  the  tariff,  on  the  ground 
that  the  principle  and  expediency  of  protection  by  the  govern- 
ment being  once  admitted,  there  was  no  good  reason  for  objection 
to  one  method  of  its  application  rather  than  another.  Whether 
this  threat  will  be  made  good,  and  a  serious  defection  be  so  created 
in  the  ranks  of  the  high-tariff  party,  by  the  repeal  of  the  act  for 
the  continued  purchase  and  useless  accumulation  of  silver — a 
measure  which  the  common-sense  and  necessities  of  the  country 
will  at  no  distant  time  compel — is  a  matter  for  the  future  to  de- 
termine. But  for  the  present  it  is  sufficient  to  note  that  the  sil- 
ver problem  has  become  one  of  the  new  phases  of  the  tariff  ques- 
tion ;  and  to  also  call  the  attention  of  those  who,  apprehensive 
of  financial  disorder  from  the  continuance  of  our  present  coinage 
policy,  are  solicitous  for  a  change,  that  the  issue  before  them 
involves  a  discussion  of  the  principles  of  protection,  and  not  in 
any  rightful  sense  the  principles  of  currency. 

One  further  point  in  connection  with  this  subject.  In  dis- 
cussing the  question  of  the  protective  policy  from  the  stand- 
point of  expediency,  which  is  claimed  to  be  the  only  proper  one 
from  which  the  people  of  the  United  States  can  wisely  consider 
the  subject,  the  desirability  of  finding  some  actual  and  practi- 
cal cases  in  the  everyday  operations  of  production  and  exchange, 
in  which  the  tests  "does  protection  really  pay "  ?  or  "how  much 
does  it  specifically  cost  to  protect''  could  be  fairly  applied  and 
clearly  worked  out,  has  always  been  acknowledged.  The  finding 
of  such  cases  and  their  acceptance  by  all  interested,  as  satisfac- 
tory, has,  however,  been  thus  far  most  difficult.  But  in  this  silver 
business  it  would  seem  as  if  there  was  sufficient  evidence  ready 
at  hand,  unimpeachable  and  clearly  understandable,  to  allow  of 
the  making  of  an  approximately  fair  estimate  of  the  cost  to 
the  country,  present  and  prospective,  of  the  interference  of  the 


THE  MOST  RECENT  PHASES  OF  THE  TARIFF  QUESTION.     131 

government,  for  the  sake  of  artificially  fostering  and  sustaining 
its  industries,  in  at  least  one  case,  namely,  that  of  silver-mining. 
And  the  items  of  such  evidence  may  be  summed  up  as  follows: 
1st.  An  annual  present  cost,  defrayed  by  taxation,  of  $24,000,- 
000  for  the  purchase  of  bullion  and  its  conversion  into  coin, 
which  is  not  only  not  needed,  but  which  the  people  seek  to  avoid 
using.  2d.  A  present  annual  loss  of  interest  on  some  sixty 
millions  of  silver  coin  idly  hoarded  in  the  vaults  of  the  Treasury, 
which  at  an  estimate  of  three  per  cent  would  represent  $1,800,* 
000  per  annum  ;  a  no  very  large  sum  in  the  accounts  of  a  nation, 
but  which  nevertheless  represents  all  the  profits,  assumed  at 
twenty  cents  per  bushel,  on  the  growing  by  somebody  of 
900,000  bushels  of  wheat.  3d.  The  loss  contingent  on  the  pres- 
ent withdrawing  from  the  channels  of  domestic  trade  or  foreign 
commerce  of  some  sixty  millions  in  value  of  an  industrial  pro- 
duct of  the  country,  and  the  movement  and  sale  of  which  in  the 
open  market  and  in  accordance  with  natural  laws  would  be  no  less 
desirable  and  beneficial  than  the  movement  and  sale  of  an  equal 
value  in  bushels  of  wheat,  bales  of  cotton,  tons  of  lead,  or  yards 
of  cloth.  4th.  The  loss  contingent  on  the  future  sale  of  surplus 
silver  by  the  government  at  a  discount  from  the  prices  at  which 
it  was  originally  purchased,  a  result  which  would  seem  to  be  an 
inevitable  alternative  in  the  future  to  a  compulsory  use  of  a 
fluctuating  depreciated  currency.  5  th.  The  immense  loss  to  the 
business  and  commerce  of  the  country  through  the  derangement 
and  depreciation  of  the  currency,  which  nearly  all  who  have  care- 
fully studied  the  subject  are  agreed  must  result  from  any  long 
continuance  of  the  present  silver  coinage  policy — a  loss  which  can- 
not be  forecast  in  figures  smaller  than  hundreds  of  millions — 
and  all  this  to  protect  an  industry  enjoying  natural  advantages 
of  an  exceptional  character,  and  the  value  of  the  total  product  of 
which  for  the  year  1881  was  only  $43,000,000/ 

1  There  is  one  other  matter  of  curious  interest  connected  with  this  silver  ex- 
periment to  which  attention  may  be  also  called.  The  mint  is  required  to  pur- 
chase each  month  at  least  $2,000,000  worth  of  silver  bullion  for  the  standard 
dollar.  It  is  obvious  that  these  purchases  are  effected  from  the  proceeds  of  a  like 
amount  of  Federal  taxation.  But  these  dollars  are  in  turn  coined  by  the  govern- 
ment at  a  large  profit ;  the  profit  from  this  coinage  alone  for  the  year  1881-2  hav- 
ing amounted  to  $3,438,829.  A  pertinent  question  which  now  suggests  itself  is, 
Does  not  this  profit  represent  a  further  tax  ?    Thus,  to  state  the  case  in  detail,  the 


132  PRACTICAL    ECONOMICS. 

It  would  seem  as  if  sufficient  had  now  been  said  to  fully 
prove  the  assertions  which  have  been  made  the  basis  of  this  dis- 
cussion ;  namely,  that  the  tariff  question  before  the  country  is 
rapidly  assuming  new  phases,  that  public  opinion  in  respect  to 
it  is  in  a  transition  state,  and  that  its  introduction  into  politics 
is  unavoidable. 

government  purchases  84  cents  worth  of  silver  bullion  and  makes  it  into  a  coin  of 
a  nominal  value  of  $1,  and  in  paying  it  out  obtains  a  dollar's  worth  of  commodi- 
ties. Is  not  here  an  indirect  tax  of  16  cents  for  every  dollar  issued  ?  Were  silver 
alone  the  currency,  a  rise  in  prices  would  remedy  this,  as  all  values  would  be 
measured  by  the  standard  silver  dollar.  But  at  present,  silver  is  not  even  the 
predominant  element  in  the  currency;  and  as  the  gold  dollar  is  the  standard, 
prices  do  not  rise.  In  short,  can  the  government  at  any  time  and  in  any  manner 
obtain  any  money  from  the  people  except  through  the  agency  of  a  gift,  a  tax,  or 
confiscation? 


THE   "FOREIGN   COMPETITIVE    PAUPER    LABOR" 
ARGUMENT  FOR  PROTECTION.1 

TO  all  who  bestow  any  attention  on  the  course  of  public 
events,  it  must  be  evident  that  the  so-called  "Foreigti 
Competitive  Pauper  Labor'  argument  is  hereafter  to  be  more  than 
ever  relied  upon  to  defend  and  sustain  the  cause  of  protection 
in  the  United  States,  and  that  the  advocates  and  believers  in 
protection  regard  such  argument  as  not  only  all-sufficient  for 
this  purpose,  but  also  as  wholly  unanswerable.  Or,  to  state  the 
case  more  plainly  and  in  detail,  the  claim  is  set  up  in  warrant 
and  justification  of  a  continued  high-tariff  policy,  that  the  differ- 
ence in  wages  in  favor  of  competitive  foreign  producers  con- 
stitutes a  good  and  sufficient  reason  why  compensating  protec- 
tive duties  should  be  levied  on  their  resulting  products  when 
imported  into  this  country;  and  the  assertion  is  further  con- 
stantly and  conjointly  made,  that  unless  such  duties  continue  to 
be  levied,  the  American  manufacturer  will  be  unable  to  with- 
stand foreign  competition ;  that  our  workshops  and  factories 
will  be  closed,  and  our  workmen  and  their  families  made  de- 
pendent on  public  charity.  It  stands  to  reason,  therefore,  that 
the  issue  here  involved  can  be  second  to  none  in  importance  to 
which  the  attention  of  the  people  of  the  United  States  can  now 
be  directed  ;  and  further,  that  the  accusation,  which  the  position  of 
the  advocates  of  protection  inferentially  but  necessarily  make 
against  all  those  who  favor  an  abatement  of  the  present  tariff  is 
so  serious,  as  to  rightfully  subject  the  latter,  if  true,  to  the  brand  of 
unmitigated  public  scorn  and  infamy.  But  is  it  true  ?  And  with 
a  view  of  helping  the  public  in  some  degree  to  intelligently  de- 
termine for  themselves  whether  it  is  or  not,  it  is  here  proposed 
to  attempt  to  review  the  whole  matter,  and  present  the  facts  in 

1  Princeton  Review. 
133 


134  PRACTICAL    ECONOMICS. 

the  case,  as  clearly  and  impartially  as  is  possible  for  one  who 
frankly  acknowledges  at  the  outset  that  he  enters  upon  the  dis- 
cussion with  a  profound  conviction  that  the  assertions  and  im- 
plied accusations  of  the  protectionists  in  the  matter  have  not 
only  nothing  whatever  of  a  substantial  basis  to  rest  upon,  but 
that  the  continuance  of  the  policy  they  advocate  will  inevitably 
and  rapidly  produce  the  very  result  they  deprecate  :  and  indeed 
has  already  done  so,  to  a  very  considerable  extent.  Before 
doing  so,  however,  it  may  profit  to  ask  attention  to  certain  in- 
cidents connected  with  the  subject  of  an  historical  interest. 
Thus,  in  a  little  essay  recently  published  (1883)  by  Mr.  Taussig 
of  Harvard  University, — not  in  advocacy  of  either  free  trade  or 
protection,  but  as  a  contribution  to  economic  history, — it  is 
shown  that  during  the  first  half  of  the  period  of  the  existence  of 
the  United  States  as  a  nation  the  demand  for  protection  and 
the  claim  that  it  was  necessary  was  based  almost  exclusively 
upon  the  "  infant  industry"  argument,  or  the  asserted  necessity 
of  fostering  domestic  industries  in  their  incipiency,  the  eventual 
cheapening  of  the  resulting  products  being  the  chief  advantage 
that  it  was  proposed  to  compass;  and  that  the  pauper  labor 
argument  never  put  in  an  appearance.  But  about  the  year  1840 
it  began  to  be  seen  that  American  manufactures  could  no  longer 
consistently  claim  protection  on  the  ground  of  being  infant  in- 
dustries, and  that  a  new  position  must  be  taken  ;  and  then  for 
the  first  time,  says  Mr.  Taussig,  the  claim  "  that  American  labor 
should  be  protected  from  the  competition  of  less  highly-paid 
foreign  labor"  was  brought  forward,  and  has  ever  since  "  remained 
the  chief  consideration  impressed  upon  the  popular  mind  in  con- 
nection with  the  advocacy  of  a  tariff  for  protection." 

Recurring  next  to  the  subject  more  immediately  under  discus- 
sion, let  it  be  assumed,  for  the  sake  of  argument,  that  all  that  the 
advocates  of  protection  assert  concerning  the  absolutely  and  (as 
compared  with  the  United  States)  the  relatively  low  wages  paid 
for  labor  in  the  different  departments  of  foreign  industry  is  in  all 
respects  correct ;  and  next  let  it  further  be  granted,  that  any  real 
reduction  in  the  standard  of  wages,  and  consequently  of  living,  in 
the  United  States  is  most  undesirable — and  then  what  of  it  ? 
Does  it  necessarily  follow,  as  all  advocates  of  protection  invariably 
assume  and  assert,  that  the  maintenance  of  a  high  tariff  on  for- 


THE   "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     1 35 

eign  importations  will  prevent  or  contribute  to  prevent  the  re- 
duction of  the  wages  of  American  labor  and  their  assimilation 
to  the  so-called  pauper-labor  rates  of  foreign  countries?  Or,  on 
the  contrary,  is  it  not  the  real  truth,  that  while  "  protection" 
has  never  exerted  anything  more  than  a  temporary  influence  in 
enhancing  wages,  it  is  now,  in  virtue  of  influences  clearly  and 
unmistakably  referable  to  its  policy,  directly  and  powerfully 
operating  in  a  manner  exactly  the  reverse  of  what  is  popularly 
believed — or,  in  other  words,  to  reduce  the  wages  of  labor  in  this 
country,  and  cause  them  to  approximate  to  the  European  stand- 
ard? Here  again  is  the  issue  involved  restated  clearly  and 
plainly;  and  as  it  is  not  for  the  interest  of  a  single  man  or  wo- 
man in  the  United  States  to  ignore  it  or  be  misinformed,  let  us 
therefore  reason  about  it. 

Wages  in  the  United  States  are,  as  a  general  rule,  unques- 
tionably higher  than  in  Europe  ;  and  mainly  for  the  following 
reason.  Owing  to  our  great  natural  advantages,  a  given  amount 
of  labor,  intelligently  applied,  will  here  yield  a  greater  or  better 
result  than  in  almost  any  other  country.  It  has  always  been  so, 
ever  since  the  first  settlements  within  our  territory,  and  has 
been  the  main  cause  of  the  tide  of  immigration  that  for  the  last 
two  hundred  years  has  flowed  hitherward.  Hamilton,  in  his  cele- 
brated report  on  manufactures,  made  before  any  tariff  on  the 
imports  of  foreign  merchandise  into  the  United  States  was  en- 
acted, notices  the  fact  that  wages  for  similar  employments  were 
as  a  rule  higher  in  this  country  than  in  Europe  ;  but  he  consid- 
ered this  as  no  real  obstacle  in  the  way  of  our  successful  establish- 
ment of  domestic  manufactures,  for  he  says  "  the  undertakers" 
—meaning  thereby  the  manufacturers — "  can  afford  to  pay 
them."  And  that  this  assertion  embodies  a  general  truth  would 
seem  to  follow  from  the  following  considerations: 

Wages  are  labor's  share  of  product,  and  in  every  healthy  busi- 
ness are  ultimately  paid  out  of  product.  No  employer  of  labor 
can  continue  for  any  great  length  of  time  to  pay  high  wages 
unless  his  product  is  large.  If  it  is  not,  and  he  attempts  it,  it  is 
only  a  question  of  time  when  his  affairs  will  be  wound  up  by  the 
sheriff.  Or,  on  the  other  hand,  if  a  high  rate  of  wages  continues 
to  be  permanently  paid  in  any  industry  and  in  any  country,  it  is 
in  itself  proof  positive  that  the  product  of  labor  is  large,  that  the 


I36  PRACTICAL    ECONOMICS. 

laborer  is  entitled  to  a  generous  share  of  it,  and  that  the  em- 
ployer can  afford  to  give  it  him.  And  if  to-morrow  our  tariff 
was  swept  out  of  existence,  this  natural  advantage  which,  sup- 
posing the  same  skill  and  intelligence,  is  the  sole  advantage 
which  the  American  laborer  has  over  his  foreign  competitor, 
would  not  be  diminished  to  the  extent  of  a  fraction  of  an  iota. 
Consider,  for  example,  the  American  agriculturist.  He  pays 
higher  wages  than  his  foreign  competitor.  In  fact,  the  differences 
between  the  wages  paid  in  agriculture  in  the  United  States  and 
Europe  are  greater  than  in  any  other  form  of  industry.  The 
tariff  cannot  help  him,  but  by  increasing  the  cost  of  all  his  in- 
strumentalities of  production,  greatly  injures  him.  With  a  sur- 
plus product  in  excess  of  any  home  demand  to  be  disposed  of, 
no  amount  of  other  domestic  industry  can  determine  his  prices. 
How  then  can  he  undersell  all  the  other  nations,  and  at  the  same 
time  greatly  prosper  individually  ?  Simply  because  of  his  natural 
advantages  of  sun,  soil,  and  climate,  aided  by  cheap  transporta- 
tion and  the  use  of  ingenious  machinery,  which  combined  give 
him  a  greater  product  in  return  for  his  labor  than  can  be  ob- 
tained by  the  laborers  in  similar  competitive  industries  in  any 
other  country.  What  has  he  to  ask  of  government  other  than 
it  will  interfere  with  him  to  the  least  possible  extent? 

In  further  illustration,  compare  the  condition  of  Switzerland 
with  that  of  the  United  States.  No  people  are  more  industrious, 
frugal  and  moral  than  the  Swiss.  They  are  the  Yankees  of  the 
Old  World.  No  one  talks  in  Switzerland  of  abridging  the  hours 
of  labor  in  the  interest  of  the  laborer  ;  but  whenever  the  hand 
finds  anything  to  do,  it  begins  to  do  it  with  the  rising  of  the  sun, 
and  keeps  doing  with  all  its  might  until  not  "  the  going  down 
thereof,"  but  until  the  darkness  of  the  night  makes  further 
effort  impracticable.  But  notwithstanding  all  this  hard  work 
and  frugal  living,  Switzerland  and  her  people  are  poor:  wages 
are  low,  and  the  comforts  and  luxuries  attainable  by  the  masses 
are  comparatively  few.  On  the  other  hand,  the  people  of  the 
United  States,  working  fewer  hours  and  less  industriously  than 
the  Swiss,  and  living  as  a  rule  wastefully  and  uneconomically, 
are  as  a  whole,  the  richest  people  on  the  face  of  the  globe.  What 
is  the  explanation  of  this  seeming  paradox  ?  There  is  but  one. 
Nature  has  been  niggardly  in  her  bounties  to  Switzerland  ;  and 


THE   "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION,     1 37 

lavish  to  the  United  States  ;  with  the  result,  that  while  the 
smallest  product,  in  proportion  to  the  labor  and  capital  applied, 
is  the  law  of  production  in  the  former  country,  the  largest 
product  at  the  smallest  cost  is  the  law  for  the  latter.  In  short, 
great  resources  and  large  product  are  natural  concomitants  ;  and 
under  such  circumstances  there  is  only  one  thing,  under  a  gov- 
ernment that  affords  adequate  protection  to  life  and  property, 
which  can  prevent  capital  and  labor  from  securing  large  rewards, 
i.e.,  profits  and  wages — and  that  is  the  diversion  of  their  products 
from  the  channels  in  which  they  would  naturally  flow,  by  de- 
structive taxation  ;  to  which  may  be  added  this  further  corollary, 
that  all  taxation  is  destructive  which  is  excessive  and  not  re- 
stricted to  the  legitimate  requirements  of  the  State. 

Take  another  case  in  point.  Wages  in  England,  in  every  in- 
dustry, are  much  higher  than  in  the  continental  states  of  Europe. 
In  the  cotton-manufacturing  industries  they  are  from  30  to  50 
per  cent  higher  than  in  France,  Belgium,  and  Germany ;  and  an 
English  cotton  operative  receives  more  wages  in  a  week  than  an 
operative  similarly  employed  in  Russia  can  earn  in  a  month. 

Now  which  of  these  countries  has  the  cheapest  labor  ?  The 
question  may  be  answered  by  asking  in  return  :  Does  England 
seek  protection  against  the  competition  of  the  continental  states 
or  is  it  the  continental  states  that  demand  protection  against 
England  ? — and  by  the  further  statement  of  fact,  namely,  that 
just  in  proportion  as  the  wages  in  any  country  decrease, 
the  demand  as  a  general  rule  in  these  same  countries  for  pro- 
tection to  domestic  industries  increases,  as  well  as  the  dread  of 
British  competition.  In  short,  instead  of  high  industrial  re- 
muneration being  evidence  of  high  cost  of  production  in  this 
country,  it  is  direct  evidence  of  a  low  cost  of  production  ;  and  in 
place  of  being  an  argument  in  favor  of  the  necessity  of  protec- 
tion, it  is  a  demonstration  that  none  is  needed.  Furthermore,  t 
all  experience  shows  that  as  the  per  capita  results  of  production 
become  greater,  the  profits  of  capital  always  tend  to  a  less  share 
of  the  product ;  and  that  this  must  be  so  will  be  apparent  if 
one  reflects  that  the  more  effective  the  capital,  the  lesser  the 
proportion  which  the  capitalist  will  need  (and  under  competi- 
tion can  take)  to  make  good  interest  upon  his  investment.  In- 
vestigations made  by  Mr.  Edward  Atkinson  show  that,  taking 


I38  PRACTICAL    ECONOMICS. 

the  experience  of  Massachusetts  as  a  basis  for  reasoning,  "  ninety 
parts  in  every  hundred  of  product  are  divided  among  those  who 
do  daily  work  for  their  daily  bread  in  that  State ;  and  that  ten 
parts  in  every  hundred  are  the  utmost  that  can  ever  be  set 
aside  for  the  maintenance  or  increase  of  capital  or  wealth."  As 
the  product  increases,  labor  therefore,  in  the  absence  of  dis- 
turbing causes,  must  get  a  larger  share — or  in  other  words, 
wages  will  rise ;  or,  to  put  the  case  differently,  large  wages  can 
only  come  from  abundance,  and  not  from  scarcity. 

High  wages,  then,  are  the  normal  result  of  low  cost,  and  low 
cost  is  the  normal  result  in  turn  of  intelligence,  conjoined  with 
good  machinery,  applied  to  great  resources  for  production. 
Wages  in  the  United  States,  then,  are  and  ought  to  be  high,  be- 
cause here  are  the  above  conditions  in  a  pre-eminent  degree.1 

1  Mr.  Edwin  Chadwick,  the  distinguished  English  economist,  in  a  recent 
essay  on  "  Employers'  Liability  for  Accidents  to  Workpeople,"  furnishes  the 
following  very  interesting  illustrations,  drawn  from  British  industrial  experiences, 
confirmatory  of  the  above  propositions: 

"A  coal-cutting  machine,"  he  says,  "has  been  invented,  by  which  one  man 
and  a  boy  will  do  better  and  more  safely  the  work  of  twenty  colliers  ;  that  is  to 
say,  at  present  in  thick  seams.  I  some  time  ago  asked  a  large  colliery  owner 
whether  he  knew  of  the  machine,  and  doubted  that  it  would  do  the  work.  He 
did  know  of  it,  and  did  not  doubt  it  would  work;  but  they  got  on  as  they  did, 
and  change  was  troublesome.  Recently  I  asked  him  whether  they,  the  coal- 
owners,  were  not  sufficiently  pressed  to  have  recourse  to  the  machine.  '  No,  I 
do  not  think  we  are,'  was  the  answer.  '  I  dare  say  that  the  Yankees  will  use  it 
first,  and  then  we  shall  follow  them.'  In  Nottingham,  the  introduction  of  more 
complex  and  more  costly  machines  for  the  manufacture  of  lace  has,  while  econo- 
mizing labor,  augmented  wages  to  the  extent  of  over  100  per  cent.  I  asked  a 
manufacturer  of  lace  whether  this  large  machine  could  not  be  worked  at  the  com- 
mon lower  wages  by  any  of  the  workers  of  the  old  machine?  'Yes,  it  might,' 
was  the  answer,  '  but  the  capital  invested  in  the  new  machinery  is  very  large, 
and  if  from  drunkenness  or  misconduct  anything  happened  to  the  machine,  the 
consequence  would  be  very  serious.'  Instead  of  taking  any  man  out  of  the 
streets,  as  might  be  done  with  the  low-priced  machine,  he  (the  employer)  found 
it  necessary  to  go  abroad  and  look  for  one  of  better  condition,  and  for  such  a  one 
higher  wages  must  be  given." 

Mr.  Chadwick  quotes  an  observation  made  to  him  by  Sir  Joseph  Whitworth, 
the  eminent  English  mechanical  engineer  and  inventor,  that  "he  cannot  afford 
to  have  his  machines  worked  with  cheap  and  poor  labor  ;  and  also  states  that  the 
English  shoe  manufacturers,  who  have  recently  introduced  the  ingenious  Ameri- 
can shoe-manufacturing  machinery,  tell  him  that  it  paid  them  the  best  to  work 
these  machines  with  wages  that  are  at  least  double  those  which  were  paid  to  the 
shoemakers  under  the  old  hand  system. 


THE   "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     139 

But  passing  from  these  general  conclusions,  which  may  not 
command  the  assent  of  the  reader  without  some  careful  reflec- 
tion, it  is  proposed  to  next  ask  attention  to  the  present  indus- 
trial condition  of  the  country,  and  to  the  action  of  certain 
influences  on  wages,  the  profits  of  capital,  and  the  demand  for 
domestic  labor,  which  would  seem  to  require  to  be  merely 
pointed  out  to  command  universal  recognition  and  acceptance. 

The  daily  course  of  events  is  fast  educating  our  people  up 
to  a  comprehension  of  the  fact,  which  economists  have  long 
been  predicting,  that  owing  to  our  great  natural  resources,  our 
rapidly  increasing  population,  the  increased  use  and  product  of 
machinery  and  the  energy  of  our  people,  the  power  of  domestic 
production  continually  tends  to  be,  and  in  most  departments  of 
industry  is,  far  in  excess  of  the  power  of  domestic  consumption. 
In  the  case  of  agriculture  the  fact  is  so  obvious  that  no  con- 
firmatory evidence  is  necessary :  but  if  any  is  needed,  it  is  all- 
sufficient  to  call  attention  to  the  enormous  surplus  of  food  and 
cotton  which  we  now  export  to  other  countries,  and  to  the  cir- 
cumstance that  these  exports  during  the  last  ten  years  have 
increased  out  of  all  proportion  to  any  increase  of  our  home  pop- 

"  At  the  beginning  of  this  century  the  cost  of  spinning  a  pound  of  yarn  (No. 
40)  was  a  shilling,  and  the  wages  divided  amongst  the  workers — men,  women 
and  children — did  not  average  more  than  4s.  6d.  a  week,  or  13s.  6d.  per  week 
per  family  of  three.  Recently,  the  cost  of  spinning  a  pound  of  yarn  was  three 
half-pence  ;  but  the  wages  have  advanced  to  40s.  per  week.  In  a  paper  by  M. 
Poulin,  a  manufacturer  at  Rheims,  France,  it  appears  that  in  the  wool  manufac- 
ture there,  the  progress  of  wages  and  machinery  have  been  similar.  In  1816  the 
wages  were  if.  50c.  per  diem  ;  they  are  now  5f.  The  price  of  weaving  a  metre 
of  merino  cloth  was  then  i6f.  ;  it  is  now  if.  45c." 

"  I  might  at  considerable  extent  adduce  the  experience  of  Lancashire,  that 
as  a  rule  the  pressure  of  manufacturing  distress  has  stimulated  the  adoption  of 
labor-saving  machinery  and  putting  more  and  more  capital  or  machinery  under 
the  same  hands,  at  increased  wages,  attended  by  reduced  costs  of  production,  by 
extended  consumption  at  reduced  prices,  and  restored  and  augmented  profits  of 
capital." 

"Finally,"  concludes  Mr.  Chadwick,  "it  may  be  noted  that  whilst  all  this 
progress  has  been  made,  population,  which  should  have  diminished,  has  been 
largely  increased  by  the  progress  of  labor-saving  machinery.  At  the  same  time 
the  profits  of  capital  have  largely  diminished.  At  the  present  time  capital  is 
beir. 3  Iriven  to  subsist  on  very  small  profits,  and  the  quickened  turn  over  of 
large  capital.  Of  late,  a  poor  pinched  and  distressed  capitalist  would  only  get 
for  a  loan  of  ^"iooo  ($5000)  of  his  capital  (accummulated  labor)  for  one  day  one 
shilling,  or  a  third  of  the  improved  day's  wages  of  a  spinner." 


140  PRACTICAL    ECONOMICS. 

ulation.  And  in  respect  to  our  so-called  manufacturing  indus- 
tries it  is  only  necessary  to  refer  to  general  complaint  that 
business,  tho  large  (as  it  necessarily  must  be  to  supply  the 
needs  of  a  nation  of  fifty-six  millions),  is,  through  excessive 
competition,  conducted  with  little  profit ;  that  a  very  large  per- 
centage of  our  manufactures,  and  notably  those  of  iron,  cotton, 
and  wool,  which  enjoy  high  protection,  have  suspended  or  cur- 
tailed their  operations ;  that  manufacturers  in  certain  lines  of 
the  two  last-named  articles  especially  have  only  been  able  to 
dispose  of  their  surplus  stocks  by  forced  sales  at  auction  and 
at  prices  less  than  the  cost  of  production  ;  that  failures  and  fires 
(the  latter  the  inevitable  indicator  and  concomitant  of  bad  times) 
are  increasing  at  a  rapid  and  alarming  rate ;  that  the  wages  of 
manufacturing  operatives  almost  everywhere  throughout  the 
country  are  undergoing  extensive  and  as  the  manufacturers 
claim,  enforced  reductions;  that  the  opportunities  for  employ- 
ment are  conjointly  becoming  limited  ;  and  finally,  that  artisans 
especially  imported  from  foreign  countries  to  work  in  certain 
employments  (e.g.,  glass-making)  in  the  United  States  are  return- 
ing to  Europe,  with  a  view  of  bettering  their  condition.1 

The  situation  is  extraordinary  and  anomalous,  but  only  such 
as  might  naturally  be  expected  from  the  circumstances.  It 
needs  but  a  superficial  glance  at  our  tables  of  exports  to  see 
that,  comparatively  speaking,  we  have  but  little  other  than  the 

1  The  following  opinions  concerning  the  present  condition  of  the  iron  and 
steel  industries  of  the  United  States  have  been  communicated  to  the  New  York 
Tribune  by  Andrew  Carnegie,  the  well-known  iron  manufacturer  of  Pennsyl- 
vania, under  date  of  September  24,  1883  : 

"  Much  as  I  regret  to  say  it,  I  believe  that  matters  will  grow  worse  for  some 
months  before  manufacturing  interests  can  reach  a  profitable  business.  A  much 
more  decided  curtailment  of  production  must  take  place  before  there  can  be  any 
improvement.  This  will  be  brought  about  naturally  by  the  prevalence  of  such 
ruinous  prices  as  will  compel  manufacturers  to  stop  producing  goods  in  advance 
of  the  country's  needs.  But  as  great  loss  is  entailed  by  curtailment  of  produc- 
tion, the  works  are  kept  running  to  their  full  capacity,  altho  prices  have 
fallen  to  figures  which  leave  even  those  manufacturers  who  have  unusually  favor- 
able facilities  little  or  no  profit,  and  entail  a  positive  loss  upon  the  average 
manufacturer.  I  think  the  wages  paid  at  the  (iron)  mills  on  the  seaboard  of  the 
United  States  to-day  are  about  as  low  as  men  can  be  expected  to  take.  In  the 
West,  notwithstanding  a  recent  agreement  of  the  men  to  accept  a  reduction  of 
30  per  cent,  it  now  seems  probable,  from  the  very  unsatisfactory  outlook,  that 
they  will  have  to  be  asked  to  work  for  still  less." 


THE   "PAC7PFP  LABOR"   ARGUMENT  FOR  PROTECTION.     141 

domestic  market,  and  not  the  whole  of  that,  for  our  vast  and 
varied  manufactured  product — the  ratio  of  exports  for  the  years 
1878-80  being  only  12.5  of  manufactured  to  87.5  of  unmanufac- 
tured commodities,  or  $102, 246,000  of  the  former  to  $721,700,000 
of  the  latter.  And  to  make  up  even  this  beggarly  12  per  cent 
it  was  necessary  to  count  in  lumber,  coal,  and  leather  as  manu- 
factured exports.  Now  it  simply  stands  to  reason  that  if  the 
manufacturing  industries  of  the  United  States  are  to  be  mainly 
limited  to  the  requirements  of  a  domestic  market,  that  their 
growth  must  be  also  limited,  and  far  below  their  normal  capacity 
and  tendencies  ;  and  if,  under  such  limitations,  or  arrest  of  indus- 
trial growth,  we  are  to  have  poured  in  upon  us  annually  from 
half  a  million  to  seven  hundred  thousand  immigrants, — mainly 
laborers  in  the  prime  of  life, — and  an  annual  increase  of  our 
population  from  natural  causes  of  about  3  per  cent  per  annum, 
it  would  seem  also  clear  that  there  must  be  extensive  reductions 
in  the  wages  of  American  laborers ;  for  with  two,  three,  or  more 
sellers  of  labor  for  every  one  buyer,  the  buyer  will  fix  the  price  ; 
and  the  price  which  the  buyer  or  American  employer  will  strive 
to  fix,  and  indeed  the  price  which  his  necessities  will  compel 
him  to  fix,  if  he  is  going  to  extend  his  operations  and  avoid 
producing  at  a  loss,  will  be  such  as  will  enable  him  to  produce 
equally  cheap  with  his  foreign  competitor.  A  continuation  of 
the  present  national  fiscal  policy,  or  in  other  words  a  continua- 
tion of  our  present  high-tariff  policy,  inevitably  means,  therefore, 
low  wages,  and  the  degradation  and  impoverishment  of  the 
masses,  or  ensures  the  very  results  which  it  is  claimed  the  pro- 
tective policy  is  certain  to  avert.  And  there  is  no  need  fur- 
ther of  adopting  in  any  degree,  in  regard  to  such  a  conclusion, 
this  line  of  prophecy,  for  the  results  in  question  have  in  a  large 
degree  already  come,  and  in  the  absence  of  reform,  have  come 
to  stay.1 

1  The  extent,  however,  to  which  many  of  even  the  most  intelligent  of  American 
citizens  fail  to  recognize  the  condition  of  affairs  into  which  as  a  nation  we  are 
drifting,  finds  a  striking  illustration  in  the  following  reported  extract  of  a  recent 
speech  by  Hon.  J.  B.  Foraker,  one  of  the  candidates  for  Governor  in  the  State  of 
Ohio,  during  the  recent  political  canvass:  "The  laborer,"  he  says,  "in  this 
country  is  a  part  of  the  governing  power.  He  is  a  voter.  He  has  a  voice  in  the 
government.  Aside,  therefore,  from  all  humanitarian  reasons,  we  want  him  to 
have  a  chance  for  self-elevation.     We  want  him  to  eat  meat  and  be  comfortable. 


I42  PRACTICAL    ECONOMICS. 

The  main  reason  why  American  manufacturers  cannot  dis- 
pose of  their  surplus  products  by  exportation  and  sale  of  the 
same  in  foreign  markets,  admits  of  a  ready  understanding,  if  one 
will  only  keep  in  view  and  reflect  upon  the  following  facts :  1st, 
from  80  to  90  per  cent  of  all  our  manufactures  exist  because 
they  must  as  a  condition  of  our  civilization,  and  because  no  for- 
eign products  of  like  kind  can  be  imported.  Any  one  may 
abundantly  satisfy  himself  of  this  by  analyzing  the  history  or 
origin  of  the  bulk  of  the  commodities  that  pass  him  on  the 
streets  of  any  busy  community,  or  are  exposed  for  sale  at  the 
marts  of  trade  ;  2d,  possibly  from  10  to  20  per  cent  are  in  a 
greater  or  less  degree  subject  to  foreign  competition  ;  3d,  in 
the  effort  to  protect  this  10  to  20  per  cent,  through  the  agency 
of  taxation  and  restrictions  on  exchanges,  the  cost  of  all  the 
products  of  our  entire  industry  is  enhanced  to   such  an  extent 

And  for  this  reason  it  is  that  we  say  if  we  cannot  go  into  the  markets  of  the  world 
without  being  subjected  to  an  unjust  and  degrading  competition,  we  will  make 
ourselves  independent  of  those  markets  by  making  markets  of  our  own.  Instead 
of  sending  our  raw  cotton  across  the  ocean,  to  be  there  manufactured  and  sent 
back  to  us,  we  will  have  cotton  mills  here.  We  will  mine  our  own  coal,  develop 
our  own  minerals,  manufacture  our  own  iron  and  steel,  build  our  own  railroads 
with  our  own  products,  and  thus  have  home  markets  and  domestic  commerce." 
Now  it  is  not  the  intent  of  the  writer  to  say  anything  discourteous  of  a  man  of 
such  high  character  as  Judge  Foraker,  but  it  is  nevertheless  true,  that  if  the  above 
remarks  are  rightfully  attributed  to  him,  he  certainly  had  very  little  idea  of  what 
he  was  talking  about;  for  the  trouble  of  to-day  with  our  industry  and  labor  is 
that  as  a  nation  we  have  too  exclusively  the  very  home  markets  he  thinks  so 
desirable,  and  are  producing  more  than  we  can  ourselves  consume.  We  export 
at  present  more  than  three  fifths  of  our  annual  product  of  raw  cotton.  Suppose, 
instead  of  sending  this  enormous  quantity  "across  the  ocean,"  we  erect  mills,  as 
proposed,  and  spin  it  ourselves.  What  will  then  be  done  with  the  product  of 
cloth  in  excess  of  domestic  want?  It  must  be  sold  abroad,  if  sold  at  all  ;  and  if 
sold  abroad,  the  people  who  buy  must  pay  for  it  in  turn  with  the  products  of  their 
labor,  for  they  have  nothing  else  to  buy  with.  But  this  means  foreign  commerce 
and  international  trade,  which  Judge  Foraker  thinks  we  can  profitably  get  along 
without.  Again,  we  raise  annually  many  millions  of  bushels  of  cereals  in  excess 
of  any  possible  demand  for  domestic  consumption  ;  and  unless  this  excess  can 
be  sold  abroad,  it  will  either  not  be  raised,  or,  if  raised,  will  rot  on  the  ground  ; 
and  what,  under  such  a  condition  of  affairs,  would  be  the  avenues  of  employment 
open  to  laborers  in  mining  coal,  smelting  iron,  or  building  railroads  and  agricul- 
tural machinery  ?  In  short,  the  system  which  Judge  Foraker  proposes  is  the 
Chinese  system  of  inclusion  and  exclusion,  which  the  Chinese  are  preparing  to 
abandon  ;  and  his  remedy  more  of  the  hair  of  the  same  dog  that  has  already 
sorely  bitten  us. 


THE    'PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     I43 

that  exports  only  exist  in  cases  where  our  natural  advantages  for 
production  are  so  great  as  to  overcome  the  increase  of  cost  thus 
artificially  and  unnaturally  created.1  And  as  confirmatory  evi- 
dence, if  not  absolute  demonstration,  of  the  truth  of  this  state- 
ment, attention  is  here  asked  to  the  results  of  an  investigation 
in  the  last  Report  (1883)  of  the  Massachusetts  "  Bureau  of  Labor 
Statistics,"  which  altho  constituting  a  contribution  to  economic 
science  of  surpassing  interest,  and  of  such  a  nature  as  ought 
to  startle  every  fair-minded  American  citizen  who  has  been  edu- 
cated to  believe  that  our  present  high  protective  policy  really 
works  for  the  benefit  of  domestic  labor  and  capital,  has  thus  far, 
very  curiously,  almost  entirely  escaped  public  attention.  In  this 
report  a  very  careful  analysis  is  made  of  the  comparative  condi- 
tion of  2240  manufacturing  establishments  in  Massachusetts, 
representing  21  different  industries  and  207,798  employees,  for 
the  years  1875  and  1880  respectively;  the  elements  of  the  analy- 

1  The  following  tables  and  estimates,  deduced  from  the  census  of  1880,  will 
afford  approximately  correct  data  for  estimating  the  method  in  which  the  bur- 
den of  the  taxation  imposed  to  maintain  the  protective  policy  of  the  United 
States  distributes  itself  among  population,  occupations,  and  professions  : 

OCCUPATIONS   OF   THE   PEOPLE   OF   THE   UNITED    STATES   IN    l88o. 

Agriculture 7,670,493 

Professional  and  personal  service 4,074, 238 

Trade  and  transportation 1,810,256 

Manufacturing,  mechanical,  and  mining  industries 3,837,112 

Total 17,392,099 

Proportion  engaged  in  agriculture  who  may  possibly  be 
subjected  to  foreign  competition  in  some  manner — 
mainly  the  growers  of  sugar  and  of  rice,  and  of  wool 
possibly,  to  a  very  small  extent,  about  5  per  cent,  or  400,000 
Proportion  engaged  in  manufacturing,  mechanical,  and 
mining  industries,  who  can  be  in  part  but  not  wholly 
subjected  to  foreign  competition  —  large  estimate 
based  on  calculation 837,112 

Total 1,237, 1 12 

Proportion  that  are  heavily  taxed,  and  placed  at  a  dis- 
advantage in  agriculture,  manufactures,  mechanical 
pursuits,  and  in  mining,  by  the  protective  system. ..   16,154,989 

Proportion  in  wfiose  ravor  tne  protective  system  is  in- 
voked, but  wnosc  wages  are  not  lower  than  in  other 
v  employments 1,237,112 


144  PRACTICAL    ECONOMICS. 

sis  being  the  census  returns  made  to  the  Federal  and  State  Gov- 
ernments respecting  capital,  laborers,  value  of  stock  used  and  of 
product,  cost  of  management,  profits,  etc.,  in  the  years  specified, 
which  are  acknowledged  to  be  as  reliable  as  any  such  returns 
possibly  can  be,  and  as  probably  superior  to  any  similar  statistics 
ever  before  collected.  The  2240  establishments  also  employed 
53  per  cent  of  the  invested  capital,  paid  58  per  cent  of  wages, 
used  57  per  cent  of  the  stock,  and  produced  57  per  cent  of  the 
entire  manufactures  of  the  State.  Premising  further  that  Mas- 
sachusetts practically  produces  none  of  the  stock  or  raw  mate- 
rial which  its  manufacturers  use,  but  buys  almost  everything  from 
beyond  her  borders,  the  investigation  shows  that  the  stock — 
metals,  fibres,  leather,  coal,  lumber,  chemicals,  and  the  like — used 
in  manufacturing  in  that  State  in  1880,  cost  11.52  percent  more 
than  it  did  in  1875  ;  and  that  the  manufacturers,  as  the  report 
expresses  it,  "  counterbalanced "  this  result  by  reducing  the 
wages  of  their  employees  during  the  period  involved  to  the 
extent,  on  an  average,  of  4.35  per  cent,  and  by  submitting  to  a 
reduction  of  their  net  profit  of  7.19  per  cent.  Now,  when  it  is 
remembered  that  the  prices  of  manufacturers'  raw  materials  have 
notably  declined  in  all  foreign  competitive  countries  during  the 
period  covered  by  the  Massachusetts  analysis ;  that  the  wages 
of  foreign  competitive  labor  during  the  same  time  have  also  very 
generally  advanced ;  and  that,  apart  from  possible  differences 
in  the  wages  of  labor,  Massachusetts  industries,  in  comparison 
with  foreign  industries,  are  not  only  not  subjected  to  any  special 
disabilities,  but  on  the  contrary  enjoy  many  advantages — it  seems 
clear  that  the  extraordinary  results  under  consideration  cannot 
be  referred  to  any  other  agency  than  that  of  our  present  national 
fiscal  policy,  which,  as  above  pointed  out,  does  by  excessive  tax- 
ation and  restriction  of  exchanges  inevitably  enhance  the  cost 
of  all  manufactured  commodities  and  their  elements.  And  if 
other  evidence  in  support  of  this  conclusion  were  needed,  it  is  so 
abundant  that  the  only  difficulty  attendant  is  to  decide  what  to 
present;  as,  for  example,  the  fact  brought  out  before  the  Mas- 
sachusetts Legislature  at  its  last  session  (1883),  that  in  respect 
to  certain  shoes,  for  which  there  might  naturally  be  a  large 
domestic  demand  to  supply  the  requirements  of  tropical  coun- 
tries, the  cost  of  the  Massachusetts-made  shoes  is  enhanced  to 


THE  "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     145 

the  extent  of  60  cents  per  pair  before  the  manufacture  even 
begins,  by  reason  of  the  taxes  on  their  constituent  materials; 
that  cordage  manufactured  in  New  York  of  imported  materials 
(which  the  country  cannot  produce)  can  be,  and  actually  is, 
through  a  rebate  of  duties,  sent  to  China  and  Brazil  and  sold 
there  for  the  equipment  of  foreign  ships,  cheaper  than  an  Ameri- 
can ship-owner  can  buy  it  within  one  mile  of  the  factory  where 
it  is  made ;  and  that,  for  the  same  reason,  salmon  packed  in  tin 
on  the  Columbia  River  can  be  transported  by  rail  and  sold 
cheaper  to  the  people  of  New  Brunswick  for  food  than  the  peo- 
ple of  Maine,  many  miles  farther  east,  can  buy  it.  Indeed, 
were  it  not  joking  on  a  serious  subject,  there  could  be  no  more 
fitting  comment  on  the  situation  than  to  recall  the  lines  of 
"  Truthful  James"  when  he  says: 

"  Then  I  looked  up  at  Nye, 
And  he  gazed  upon  me  ; 
And  he  rose  with  a  sigh, 
And  said,  'Can  this  be? 
We  are  ruined  by  Chinese  (foreign)  cheap  labor!'" 

It  is  not  overlooked  in  connection  with  this  discussion  that 
the  complaint  of  overproduction,  restricted  markets,  and  no 
profits  in  business,  by  reason  of  excessive  competition,  is  at 
this  time  general  in  all  commercial  countries,  and  especially  in 
Great  Britain,  where  protection  as  an  element  of  disturbance  is 
wanting;  and  that,  therefore,  the  reference  here  made  of  the 
existing  unsatisfactory  state  of  affairs  in  the  United  States  to 
our  national  fiscal  policy  may  seem  to  not  a  few  to  be  unsound 
both  in  respect  to  facts  and  logic.  That  there  have  been  great 
disturbances  in  the  work  of  production  and  exchange  of  most 
countries  in  recent  years,  and,  taking  the  world  throughout, 
most  notably  since  1873,  and  that  these  disturbances  still  con- 
tinue, is  not  to  be  denied.  And  the  explanation  of  it  is  refer- 
able, in  the  opinion  of  the  writer,  in  a  very  large  degree  to  a 
class  of  agencies  which  have  not  thus  far  received  the  attention 
from  economists  and  publicists  which  they  merit ;  namely,  the 
wonderful  changes  which  through  invention  and  discovery  have 
recently  taken  place  in  the  world's  method  of  doing  its  work  of 
production  and  distribution.  These  changes  have  been  accom- 
panied with  immense  losses  of  capital  and  great  disturbances  of 


146  PRACTICAL    ECONOMICS. 

labor,  in  which  the  United  States  has  participated  and  suffered 
in  common  with  other  countries.  That  their  ultimate  outcome, 
however,  is  to  be  good,  cannot  be  doubted;  for  by  an  economic 
law,  which  Mr.  Atkinson,  of  Boston,  more  than  others,  has 
recognized  and  formulated,  all  material  progress  is  affected 
through  the  destruction  of  capital  by  invention  and  discovery, 
and  that  the  rapidity  of  such  destruction  is  the  best  indicator 
of  the  rapidity  of  progress.1  But  in  the  readjustment  by  na- 
tions of  their  industries  to  the  new  circumstances,  which  is  still 
going  on  and  is  yet  very  far  from  complete,  the  "law  of  the 
survival  of  the  fittest"  is  going  to  fully  assert  itself ;  and  in  this 
struggle  the  United  States,  by  reason  of  possessing  as  no  other 
nation  does,  the  conditions  for  the  cheapest  production  of  the 
great  staple  commodities  of  the  world's  consumption,  ought 
to  prove  itself  the  fittest,  and  dominate  in  "  manufactures"  as  it 
now  dominates  in  respect  to  the  production  of  cotton  and  food 
products.  Why  such  a  result  has  not  yet  been  attained  ;  why 
in  the  readjustment  of  industries  to  the  new  conditions,  the 
United  States  suffers  disproportionately,  or  even  as  much  as 
her  chief  industrial  competitor,  Great  Britain  ;  and  why  under 
the  present  national  fiscal  policy  there  is  little  chance  for  im- 
provement— finds  a  sufficient  explanation  and  answer  in  the 
results  of  the  Massachusetts  industrial  investigation  before  re- 
ferred to,  even  without  taking  into  account  a  vast  amount  of 
other  corresponding  and  confirmatory  evidence.2 

1  Every  man  who  is  trying  to  make  some  new  labor-saving  invention  or  dis- 
covery is  trying  at  the  same  time  to  practically  destroy  the  value  of  previously 
accumulated  labor  or  capital.  If  an  invention  could  be  made  to-morrow  which, 
at  no  greater  cost,  could  spin  or  weave  ten  per  cent  more  of  cotton  fibre  in  a 
given  time  than  is  now  practicable,  all  the  existing  cotton  machinery  of  the  world, 
now  representing  hundreds  of  millions  of  dollars  of  expenditure,  would  be  worth 
little  more  than  old  metal.  By  the  discovery  within  the  last  decade  of  a  method 
of  manufacturing  the  coloring  principle  of  madder  (the  principal  coloring  mate- 
rial used  in  printing  calicoes),  three  or  four  factories  in  Germany  and  England 
employing  but  a  few  hundred  men  were  substituted  for  hundreds  of  thousands 
of  acres  of  land  and  thousands  of  laborers  which  had  been  before  devoted  to  the 
cultivation  of  the  madder  plant.  So  also  the  construction  of  the  Suez  Canal  is 
said  to  have  practically  rendered  worthless  over  2,000,000  tons  of  British  ship- 
ping which,  built  for  the  India  trade  via  the  Cape  of  Good  Hope  and  not  fitted 
for  the  canal,  was  no  longer  wanted. 

8  A  recent  writer  in  the  British  Boot  and  Shoe  Journal,  after  noticing  the 
testimony  given  before  the  Massachusetts  Legislature  last  winter,  to  the  effect 


THE   ''PAUPER  LABOR"   ARGUMENT  FOR  PROTECTION.     I47 

Coming  back  now  more  directly  to  the  "  pauper-labor"  argu- 
ment :  there  is  no  question  that  there  is  a  great  amount  of 
poorly  paid,  half-starved  labor  in  Europe  and  other  countries. 
But  what,  let  us  inquire,  is  its  true  relation,  from  a  purely  prac- 
tical, business  point  of  view,  to  the  laborers  and  industries  of 
the  United  States?  Apart  from  agriculture,  in  the  sphere  of 
which  industry  we  have  no  formidable  competitors,  inasmuch 
as  we  can  profitably  undersell  the  products  of  the  poorest  paid 
labor  in  the  world, — the  peasants  of  Russia  and  Hungary,  the 
fellahs  of  Egypt,  and  the  ryots  of  India, — the  dreaded  pauper 
of  foreign  countries  is  engaged  mainly  in  handicraft,  as  contra- 
distinguished from  machinery  manufacturing;  as,  for  example, 
in  the  manufacture  of  pottery,  where  the  laborer  works  almost 
exactly  as  did  his  predecessor  four  thousand  years  ago ;  or  in 
the  case  of  silk-ribbon  weavers,  whom  a  recent  .correspondent 
of  the  New  York  Tribune  describes  as  operating  their  hand- 
looms  in  poor,  ill-ventilated  cottages,  and  in  the  same  rooms  in 
which  the  operatives  eat  and  sleep.  And  apart  from  pottery 
and  silk,  a  great  variety  of  other  products  manufactured  or  pro- 
duced under  similar  conditions  might  be  mentioned.  In  the 
case  of  Europe,  the  people  who  work  at  these  handicrafts  live 
for  the  most  part  in  the  most  densely  populated  districts,  where 
all  natural  advantages  and  opportunities  for  employment  have 
long  ago  been  exhausted,  and  where  the  moral  inertia  conse- 
quent on  lack  of  intelligence  or  means  is  an  almost  insuper- 
able obstacle  in  the  way  of  any  attempt  on  the  part  of  the 
laborer  to  improve  his  situation  by  engaging  in  other  pursuits 
or  by  emigration.  Under  such  circumstances  wages  are  un- 
doubtedly very  low,  and  the  protectionist,  in  view  of  this  fact, 

that  the  existing  capital  and  labor  at  present  engaged  in  the  manufacture  of  shoes 
in  the  United  States  is  sufficient,  if  fully  employed  for  nine  months,  to  supply  any 
current  market  demand  for  the  entire  year,  the  recent  failures  in  the  shoe  indus- 
try, and  the  general  tendency  to  a  reduction  of  wages  in  this  and  every  other 
branch  of  industry  in  the  United  States,  thus  pertinently  comments  on  the  situa- 
tion: "One  may  here  [England]  ask,  Where  are  the  advantages  and  disadvan- 
tages of  protection  to  the  shoe  trade?  We  have  in  this  country  [England] 
certainly  not  so  much  trade  as  could  be  done,  but,  nevertheless,  we  have  a  trade 
which  exists  all  the  year  round;  we  have  in  addition  a  considerable  export  trade, 
and  the  wages  of  our  workmen  have  advanced  rather  than  declined.  Our  cousins 
across  the  Atlantic  have  six  or  eight  months'  home  trade,  no  export,  and  a  falling 
labor  market.     Surely  the  comparison  should  be  deterrent  enough." 


148  PRACTICAL   ECONOMICS. 

asks  us,  with  a  sort  of  "  now-I-have-got-you  air,"  how  can  we, 
apart  from  the  protection  afforded  by  the  tariff,  enter  into 
successful  competition  with  them,  except  by  bringing  down 
the  wages  of  our  laborers  to  a  level  with  the  wages  of  these 
paupers?  But,  in  the  name  of  common-sense,  why  should  we 
as  a  nation  desire  to  attempt  any  such  competition?  What 
possible  reason  or  inducement  is  there  for  wanting  to  introduce 
these  handicraft  industries  into  this  country,  and  of  attempting 
to  keep  them  alive  by  means  of  enormous  taxes  levied  under 
the  tariff  upon  the  whole  people, — as,  for  example,  60  per  cent 
upon  silks,  and  from  60  to  100  per  cent  on  earthenware  and 
crockery, — when  we  can  buy  all  we  want  of  these  products  with 
a  very  small  part  of  the  excess  of  our  cotton  and  grain ;  and 
which  excess,  it  ought  to  be  especially  borne  in  mind,  if  not 
sent  out  of  the  country  and  exchanged  for  some  products  of 
foreign  labor,  will  either  not  be  raised,  or  if  raised,  will  rot  in 
the  ground?  The  main  thing  which  pauper  laborers  in  Europe 
and  everywhere  else  want  is  food  ;  food  beyond  everything  else, 
for  they  are  starving.  And  when  it  is  proclaimed,  with  real  or 
feigned  fright  and  horror,  by  political  orators  and  partisans,  that 
these  people  are  willing  to  work  for  fifteen  or  twenty  cents  per 
day,  the  proclamation  means  that  they  are  willing  to  give  the  re- 
sults of  each  and  every  day  of  their  hard  and  often  disagreeable 
and  degrading  labor,  in  making  things  which  the  American  agri- 
culturist wants  and  cannot  advantageously  produce  himself,  for 
one  fourth  of  a  bushel  of  wheat,  one  half  a  bushel  of  corn,  two 
pounds  of  beef,  or  three  of  pork  or  lard,  products  which  repre- 
sent  but  a  fraction  of  a  day's  labor  in  the  United  States.  For 
this  is  the  basis  on  which  the  pauper  laborer  of  foreign  coun. 
tries,  working  for  fifteen  to  twenty  cents  per  day,  is  going  to 
exchange  with  us,  if  he  exchanges  at  all.  Certainly  it  would 
seem  that  there  is  nothing  which  the  agricultural  interest  of  the 
United  States,  which  represents  directly  or  indirectly  three 
fourths  of  our  entire  population,  could  do  to  profit  itself  more 
than  to  encourage  such  exchanges. 

Consider  next  the  relation  of  this  same  bugbear  of  foreign 
competitive  pauper  labor  to  such  of  our  manufacturing  indus- 
tries as  rely  mainly  on  machinery  for  the  work  of  production. 
In  regard  to  a  majority  of  these,  there  can  be  no  doubt  that 


THE   "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     1 49 

their  representative  manufacturers  would  be  able  to  defy  the 
competition  of  the  world  if  the  burden  of  taxation  was  re- 
moved, to  the  extent  that  it  is  in  Great  Britain,  from  the  mate- 
rials which  enter  into  their  products,  and  from  tools  and 
machinery,  and  from  many  of  the  commodities  which  are  essen- 
tial to  the  living  and  comfort  of  their  employees,  and  the 
continuance  of  which  is  no  longer  needed  to  meet  any  necessi- 
ties of  the  state  for  revenue.  Where  the  use  of  machinery — 
especially  of  a  complex  kind — which  is  the  kind  mainly  used  in 
the  manufacture' of  the  world's  great  staple  products,  and  in  the 
invention  and  application  of  which  the  United  States  especially 
excels — forms  an  important  factor  in  the  work  of  production, 
the  cost  of  the  wages  paid  to  the  people  who  work  such  machin- 
ery forms  no  criterion  of  the  cost  of  the  goods  which  are  the 
resulting  product.  In  all  such  cases  "  it  is  the  operative  that 
earns  the  highest  wages  who  compasses  the  lowest  cost  of  pro- 
duction ;"  and  whoever  doubts  or  fails  to  comprehend  these 
propositions  has  not  yet  grasped  the  A  B  C  of  the  subject. 
Thus,  for  example,  when  the  product  of  one  day's  labor  in  the 
manufacture  of  cotton  cloth  in  the  United  States,  properly 
apportioned  and  with  the  aid  of  machinery,  is  equivalent  to  the 
product  of  at  least  twenty  days'  labor  for  a  like  purpose  in 
China,  Central  America,  and  other  semi-civilized  countries  (as  is 
the  case),  it  is  a  matter  of  very  little  consequence  whether  the 
laborers  who  grow  the  cotton  in  Texas  or  spin  and  weave  it 
in  New  England  receive  a  greater  or  less  number  of  dollars 
per  week  for  their  wages;  for  the  question  as  to  who  shall 
command  the  markets  of  such  countries  turns  up  other  and 
entirely  different  considerations.  To-day  the  poorest  paid 
labor  in  the  world,  namely,  that  of  the  natives  of  India,  will  be 
glad  to  work  for  twelve  and  a  half  cents  per  day,  making  bag- 
ging (gunny-cloth)  to  bale  American  cotton  out  of  the  fibre  of 
the  jute  ;  but  the  American  manufacturer,  paying  from  seven 
to  ten  times  as  much  per  day  to  women  operatives,  can  make  a 
better  article  so  much  cheaper,  that  the  Indian  producer  has 
been  practically  driven  from  the  field  of  competition  in  this 
country.  And  yet,  so  long  as  the  Federal  Government  con- 
tinues to  levy  a  tax  of  six  dollars  per  ton  on  the  fibre  which  the 
American    manufacturer   uses  there    is   very  little   chance  for 


I50  PRACTICAL    ECONOMICS. 

the  latter  to  sell  the  results  of  his  ingenious  machinery  and 
highly  paid  labor  in  any  other  than  his  own  country;  and  so  a 
large  number  of  the  American  bagging  mills  are  now  idle,  and 
the  home  market  is  glutted  with  their  unsold  products.  The 
case  of  the  miserably  paid  women  and  children  in  the  "  black 
country"  of  England  has  recently  been  cited  by  a  correspond- 
ent of  the  N.  Y.  Tribune  as  a  fearful  example  of  what  the 
working  men  and  women  of  the  United  States  would  be  sub- 
jected to  if  they  should  undertake  to  make  nails  in  the  absence 
of  a  high  protective  tariff  on  the  importation  of  nails,  when  the 
truth  is  that  the  logic  is  all  the  other  way,  and  it  is  the  English 
laborer  who  needs  to  be  protected  against  the  American,  and 
not  the  American  against  the  English  pauper;  inasmuch  as  the 
latter,  if  he  will  persist  in  making  nails  by  hand,  has  got  to  com- 
pete against  machines  of  American  invention  which  can  make 
more  nails  in  one  hour  than  the  paupers  working  by  hand  can 
make  in  a  day,  and  at  less  than  a  tenth  of  the  expense.  To 
which  it  may  be  added,  that  the  operatives  who  work  the 
American  machines  receive  almost  the  highest  wages  paid  in 
the  United  States  in  any  department  of  mechanical  industry. 

One  of  the  most  novel  and  interesting  illustrations,  which  the 
writer  has  recently  met  with,  of  the  absurdity  and  fallacy  of 
much  of  the  current  averment  of  the  necessity  for  protection 
for  such  a  country  as  the  United  States  against  the  competitive 
pauper  labor  of  foreign  countries,  is  given  in  Senior's  "  Conversa- 
tions and  Journals  in  Egypt,"  (London,  1 882).  Mr.  Senior  was  an 
English  lawyer  and  economist  of  high  standing,  who  some  years 
ago  visited  Egypt  in  company  with  a  celebrated  British 
engineer,  Mr.  McLean,  and  in  the  course  of  their  travels  the 
two  visited  the  Pyramids;  and  while  on  the  ground  speculated 
concerning  the  cost  and  the  amount  of  labor  entering  into  these 
great  structures.  "  I  asked  Mr.  McLean,"  writes  Mr.  Senior 
(pp.  63,  64),  "  for  what  he  could  reproduce  the  largest  of  them 
on  a  spot  in  the  immediate  neighborhood,  as  in  their  case,  of  a 
quarry.  He  said,  roughly  estimating  their  contents  at  80,000,000 
cubic  feet,  and  the  cost  at  3d.  (six  cents)  per  cubic  foot,  for  a 
million  sterling.  It  appears  that  their  contents  are  88,000,000 
cubic  feet.  The  cost,  therefore,  would  be  £62,500  more — in  all, 
£1,062,500"  (or  $5,310,000).    McLean:  "There  would  not  be  the 


THE   "PAUPER  LABOR"  ARGUMENT  FOR  PROTECTION.     151 

least  difficulty  in  the  performance,  and  with  25,000  men  I  could 
do  it  in  one  year;  with  2500  men  in  ten  years  and  turn  out 
a  much  better  article."  SENIOR:  "  For  what  could  you  build  a 
pyramid  in  England?"  McLean:  "  I  cannot  answer  that  ques- 
tion without  knowing  what  I  should  have  to  pay  for  the  stone 
— that  is,  for  permission  to  extract  it.  Let  me  have  the  use  of 
the  quarry  for  nothing,  and  I  think  a  pyramid  could  be  built 
nearly  as  cheaply  in  England  as  in  Egypt.  It  is  true  that  labor 
is  four  times  as  dear  in  England  as  in  Egypt,  as  our  laborers  re- 
ceive three  shillings  a  day  where  the  Egyptians  receive  a  six- 
pence, and  our  men  do  only  two  thirds  more  work ;  but  our  skill 
and  our  mechanical  contrivances  nearly  make  up  the  difference." 

Now  if  pyramids  were  an  article  of  international  trade,  i.e., 
of  demand  and  supply,  and  the  question  of  wages  was  to  be 
held  to  be  determinative  of  what  country  should  furnish  them, 
it  would  seem  impossible  for  the  English  laborer  to  engage  in 
the  pyramid  business  without  being  largely  protected  against 
the  pauper  labor  of  Egypt,  when  the  real  truth  would  be  that 
it  was  the  Egyptian  pauper,  working  for  sixpence  a  day  and 
finding  himself,  that  needed  large  protection  against  the  com- 
paratively high-priced  Englishman,  and  that  even  then  he  could 
only  supply  a  comparatively  restricted  demand  of  his  own  local 
market  for  pyramids. 

Further  evidence  to  the  same  effect  might  be  adduced  to 
almost  any  extent ;  but  enough,  it  is  believed,  has  been  said  to 
abundantly  prove,  that  instead  of  fearing  the  competition  of 
foreign  pauper  laborers,  who  are  paupers  mainly  because  of  the 
absence  of  natural  advantages  and  a  lack  of  the  ownership 
and  use  of  machinery,  we  ought  rather  to  welcome  it  and 
recognize  that  there  is  no  way  in  which  as  a  nation  we  can  so 
rapidly  and  certainly  enrich  ourselves  as  by  exchanging  the 
products  of  our  skill  and  machinery,  representing  but  a  com- 
paratively small  amount  of  labor,  with  the  products  of  the  so- 
called  foreign  pauper  laborers,  representing  a  comparatively 
large  amount  of  labor. 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS.1 


THE  term  "  political  economy"  has  had  many,  and  to  some 
extent  discordant,  definitions.  As  a  department  of  knowl- 
edge all  will,  however,  probably  agree  that  its  object  is  to  en- 
deavor to  learn  from  the  experience  of  mankind  the  conditions  for 
the  production,  accumulation,  and  distribution  of  wealth  (using 
the  term  "  wealth"  in  the  sense  of  abundance  of  all  material  good, 
and  the  results  which  flow  from  such  abundance),  and  to  deduce 
from  such  conditions  the  rules  or  principles  which,  when  adopted 
as  the  guide  for  human  action,  will  best  determine  and  facilitate 
progress  in  this  same  direction  for  the  future.  Again,  some 
deny  that  political  economy  is  entitled  to  be  called  a  science. 
But  be  this  as  it  may,  all  will  probably  further  agree  that,  in 
common  with  political,  mental,  and  moral  philosophy,  it  is  not 
an  exact  science  in  the  sense  that  the  physical  sciences  are  so 
considered ;  inasmuch  as  it  is  founded  on  the  results  of  human 
action,  which  vary  greatly  under  different  conditions  and  influ- 
ences, and  the  record  of  which  is  rarely  so  complete  and  un- 
questionable as  to  compel  universal  and  unqualified  acceptance ; 
whereas  the  natural  laws  constituting  the  basis  of  the  physical 
sciences  are  so  universal  and  unvariable,  and  so  well  defined 
and  accepted,  that  deductions  can  be  made  from  them  with  the 
utmost  certainty.  Under  such  circumstances,  it  would  seem 
that  the  most  important  contribution  which  could  be  made  to 
the  history  and  progress  of  political  economy  would  be  a  full 
and  unquestionable  record  of  the  results  of  a  large  and  complete 
experience  in  respect  to  any  one  of  the  subjects  which  are 
acknowledged  to  be  embraced  within  its  sphere  of  inquiry  and 
consideration  ;  and  such  a  contribution,  it  is  believed,  can  now 
be  made  in  the  record  of  the  recent  experience  of  the  Govern- 
ment of  the  United  States  in  obtaining  revenue  through  taxa- 

1  Princeton  Review. 
152 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.     1 53 

tion  of  the  domestic  manufacture  and  sale  of  distilled  spirits. 
This  record  it  is  now  proposed  to  make  more  completely  than 
has  ever  before  been  attempted  ;  and  as  the  personal  experiences 
of  the  writer  as  a  former  official  of  the  Government  largely 
intrusted  with  the  supervision  of  this  department  of  the  national 
revenues  forms  a  not  unimportant  part  of  the  record,  no  fur- 
ther apology,  it  is  thought,  will  be  needed  for  making  the  nar- 
ration to  some  extent  autobiographical  in  its  character. 

As  the  manufacture  of  distilled  spirits  in  some  form  exists, 
and  always  has  existed,  among  all  civilized  nations,  and  as  the 
use  of  the  article  is  always  constant  and  extensive,  generally 
immoderate,  and  largely  voluntary  and  as  a  matter  of  pure 
luxury,  nearly  all  governments  have  come  to  regard  it  as  an 
eminently  proper  and  productive  source  for  the  obtaining  of 
revenue  through  the  agency  of  taxation.  Such  taxation  accord- 
ingly forms  an  essential  feature  of  the  fiscal  systems  of  most  of 
the  European  States  ;  but  in  three  only — Great  Britain,  France, 
and  Russia — are  the  present  taxes  so  large  and  productive  as  to 
call  for  any  particular  notice.  Thus,  in  Great  Britain  the  taxa- 
tion of  distilled  spirits  is  (1884)  at  the  rate  of  I  or.  ($2.50)  per 
imperial  proof-gallon  '  of  277^^  cubic  inches ;  which  would  be 
equivalent  to  ys.  ^d.  ($1.83)  on  the  wine-gallon  of  231  cubic 
inches,  which  is  adopted  as  the  American  standard.  It  is  also 
to  be  noted  in  this  connection  that  the  first  cost  of  British  spirits 
ranges,  according  to  the  price  of  grain  from  which  they  are  dis- 
tilled, from  is.  6d.  (37^  cents)  to  2s.  (50  cents)  per  imperial  proof- 
gallon  ;  while  the  first  cost  of  the  American  product  ranges 
from  17  to  24  cents  per  wine-gallon;  thus  making  the  excise  on 
British  spirits  range  from  five  to  six  and  a  half  times  the  first 
cost  of  production  ;  while  a  tax  of  $2  on  the  wine-gallon  of  proof- 
spirits,  as  formerly  imposed  in  the  United  States,  was  equivalent 
to  from  eight  to  twelve  times  their  first  cost.  The  revenue  col- 
lected from  distilled  spirits  under  the  excise  in  Great  Britain  for 
the  fiscal  year  1883  (apart  from  licenses  for  the  sale  of  the  same) 
was  ^14,211,490  ($71,057,450),  as  compared  with  ^14,273,786 
in  1882  and  £14,393,572  in  1881.  The  amount  which  accrued  in 
addition  to  the  British  revenue  during  the  year  1883  from  spirit 

1  By  proof  gallon  is  understood  a  mixture  of  equal  parts  of  pure  alcohol  and 
water. 


154  PRACTICAL    ECONOMICS. 

distillers',  dealers',  and  publicans'  licenses  was  £1,598,803 
($7,991,015),  as  compared  with  £1,601,985  from  the  same  sources 
in  1882  and  £1,570,955  in  1881.  From  1660,  the  year  when 
taxes  on  domestic  distilled  spirits  were  granted  "  by  Parliament 
to  Charles  II.  and  his  successors  forever,  as  full  compensation" 
for  loss  of  payments  previously  "due  by  landholders  to  the 
crown,"  down  to  and  including  the  receipts  of  the  year  1883, 
the  amount  of  revenue  that  the  British  Exchequer  has  obtained 
from  this  single  department  of  excise  or  internal  taxation  has 
been  estimated  at  the  enormous  sum  of  £614,994,896,  or 
$3,074,974,480.  (See  "  Financial  Reform  Almanac,"  London, 
1884). 

In  France  the  budget  for  1876  estimates  the  receipts  of  in- 
ternal revenue  from  the  tax  on  liquors  at  364,190,000  francs,  or 
$72,858,000. 

In  Russia  the  manufacture  and  sale  of  distilled  spirits  is  a 
strict  government  monopoly, — the  government  in  the  first  in- 
stance selling  the  privilege  of  dealing  in  the  article ;  and  sec- 
ondly, reserving  to  itself  the  right  of  distilling  all  domestic 
liquors,  and  supplying  the  same  to  dealers  at  a  present  rate  of 
about  one  dollar  (gold)  per  gallon.  The  aggregate  consumption 
of  the  common  distilled  spirits  of  Russia  (termed  "  vodki")  is 
very  great,  and  of  the  entire  income  of  the  government  from 
ordinary  sources  more  than  one  third  is  believed  to  be  derived 
from  the  manufacture  and  sale  of  domestic  liquors.  In  the 
budget  for  1872  the  net  receipts  were  estimated  at  £61,899,000, 
of  which  £21,500,000  ($107,500,000)  were  credited  to  excise 
taxes  on  spirits  and  beer. 

The  first  attempt  of  the  United  States  to  obtain  revenue 
through  the  taxation  of  domestic  distilled  spirits  was  author- 
ized by  the  first  Congress  under  the  Constitution,  and  under 
a  law  that  went  into  operation  in  1791.  Altho  the  rate 
of  taxation  imposed  was  comparatively  moderate, — ranging 
from  nine  to  twenty-five  cents  per  gallon,  according  to  the 
strength  of  the  spirits,  with  an  abatement  of  two  cents  per 
gallon  for  cash  payments, — and  altho  the  necessities  of  the  new 
Government  for  revenue  were  most  imperative,  the  enactment 
of  this  law  provoked  great  opposition  and  resistance ;  and  in 
1794  the  counties  of  Western  Pennsylvania  rose  in  insurrection 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.     1 55 

against  its  enforcement.  A  proclamation  by  President  Wash- 
ington  commanding  the  insurgents  to  disarm  and  disperse  was 
in  the  first  instance  entirely  disregarded  ;  and  it  was  not  until 
an  armed  force,  collected  from  the  militia  of  the  other  States, 
had  marched  to  the  centre  of  the  disturbed  district  and  had 
arrested  the  ringleaders  that  the  authority  of  the  Federal  Gov- 
ernment was  restored.  As  further  illustrating  the  very  serious 
character  of  this  insurrection,  it  may  be  noted,  that  the  cost  of 
its  suppression  was  one  and  a  half  millions  of  dollars,  and  that  at 
a  time  when  the  aggregate  annual  expenditures  of  the  Federal 
Government  for  all  ordinary  purposes  were  only  about  four 
millions  of  dollars.  The  amount  of  distilled  spirits  produced  in 
the  United  States  at  the  time  of  the  enactment  of  the  tax-law 
of  1791  was  estimated  by  Alexander  Hamilton,  then  Secretary 
of  the  Treasury,  at  6,500,000  gallons,  of  which  3,500,000  gallons 
was  believed  to  be  the  product  of  the  distillation  of  foreign 
materials, — mainly  molasses,  imported  largely  by  New  England 
from  the  West  Indies  for  the  manufacture  of  rum, — and  of  which 
product  from  300,000  to  500,000  gallons  were  sent  annually  at 
that  time  from  the  same  section  of  country  to  Africa  for  the 
purchase  of  slaves.1  Allowing  6,000,000  of  gallons  for  domestic 
consumption,  the  per  capita  consumption  of  distilled  spirits  in 
the  United  States  during  this  period  must  have  been  about  one 
and  a  half  gallons  (1.52). 

Upon  the  accession  of  Mr.  Jefferson  to  the  Presidency  in 
1800,  and  upon  his  recommendation,  the  obnoxious  spirit-tax, 
in  common  with  all  other  internal-revenue  taxes,  was  repealed. 
In  181 3,  as  the  result  of  the  war  with  Great  Britain,  it  became 
necessary  for  the  Federal  Government  to  again  resort  to  the 
collection  of  an  internal  revenue,  and  of  the  system  then  enacted 
the  taxation  of  domestic  distilled  spirits  through  the  agency  of 
licenses  for  distilleries  formed  a  part.  With  the  close  of  the 
war,  however,  all  these  taxes  were  again  and  soon  repealed,  and 
from  1818-22  to  1862,  or  for  a  period  of  more  than  forty  years, 

1  Official  documents  show  that  from  1804  to  1807  inclusive  202  cargoes  of 
negro  slaves  were  brought  into  Charleston,  S.  C.  Of  these  slaves  3914  were 
sold  for  account  of  persons  residing  in  Bristol,  R.  I.;  3488  for  Newport.  R.  I.; 
556  for  Providence,  R.  I.;  280  for  Warren,  R.  I.;  200  for  Boston,  Mass.;  and 
250  for  Hartford,  Conn.  This  was,  it  will  be  observed,  at  only  one  port  in  the 
South,  and  during  a  period  of  only  four  years. 


I56  PRACTICAL    ECONOMICS. 

the  Federal  Government  levied  no  direct  taxes  upon  any  pro- 
cess or  result  of  domestic  industry,  nor  any  excise,  stamp,  or 
income  taxes,  nor  any  direct  taxes  upon  real  property ;  the  ex- 
penses of  a  simple  and  economic  administration,  and  the  pay- 
ment of  the  interest  and  principal  of  a  small  public  debt, — never 
in  excess  at  any  one  time  of  twenty-one  millions, — being  defrayed 
almost  entirely  by  indirect  taxes,  levied  in  the  form  of  a  light 
tariff  on  the  importation  of  foreign  goods  and  merchandise. 

It  was  then  with  such  antecedents,  and  under  such  condi- 
tions in  respect  to  taxation,  that  the  nation  found  itself,  in  the 
spring  of  1861,  suddenly  and  unexpectedly  involved  in  a  gigan- 
tic civil  war,  in  which  its  very  existence  was  threatened  by  the 
uprising  of  at  least  a  third  of  its  population  against  the  legiti- 
mate and  regularly  constituted  authorities.  The  most  urgent  and 
important  requirement  of  the  Federal  Government  at  the  outset 
was  for  money.  Men  in  excess  of  any  immediate  necessity  vol- 
unteered for  service  in  the  army ;  but  to  equip  and  supply  even 
such  as  were  needed  required  a  large  expenditure,  and  for  de- 
fraying it  there  was,  on  the  part  of  the  Government,  neither 
money,  credit,  nor  any  adequate  system  of  raising  money  by 
taxation.  Furthermore,  as  the  necessities  of  the  Government 
developed  and  became  more  urgent,  there  also  developed  on 
the  part  of  Congress  and  the  Federal  officials  a  most  remarkable 
timidity  and  muddle  of  ideas  respecting  the  financial  situation. 
From  the  very  outset  all  direct  or  internal  taxation  was  avoided; 
there  having  been  an  apprehension  on  the  part  of  Congress  that, 
inasmuch  as  the  existing  generation  had  never  been  accustomed 
to  it,  and  as  all  machinery  for  assessment  and  collection  was 
wholly  wanting,  its  adoption  would  create  discontent  and 
thereby  interfere  with  the  vigorous  prosecution  of  hostilities.  It 
would  be  foreign  to  the  purpose  of  this  special  discussion  to 
here  notice  the  various  substitutes  for  obtaining  revenue  that 
were  resorted  to  by  the  Federal  Government  in  addition  to  the 
increase  of  the  tariff  on  imports, — such  as  loans  from  the  banks, 
the  issue  of  Treasury  notes  payable  on  demand,  the  apportion- 
ment of  a  direct  tax  among  the  States,  and  an  income-tax  of  3 
per  cent  on  the  excess  of  all  incomes  over  $800 ;  the  first  to  take 
effect  eight  and  the  latter  ten  months  after  the  date  of  enact- 
ment;— and  it  is  sufficient  to  say  that  it  was  not  until  July,  1862, 


o"c/p  expedience  in  taxing  distilled  spipits.   157 

or  nearly  fifteen  months  after  the  outbreak  of  the  war,  that  any 
systematic  scheme  for  internal  taxation  was  devised  and  put 
into  operation.  And  of  this  scheme,  as  might  naturally  have  been 
anticipated,  the  taxation  of  the  domestic  manufacture  and  sale 
of  distilled  spirits  constituted  a  leading  feature. 

For  a  period  of  nearly  a  half-century  previous,  the  manufacture 
of  spirits  in  the  United  States,  as  already  stated,  had  been  free 
from  all  specific  taxation  or  supervision  by  either  the  national  or 
State  governments ;  and  being  produced  mainly  from  Indian 
corn,  at  places  adjacent  to  the  localities  where  this  cereal  was 
cultivated,  and  to  a  large  extent  also  from  corn  that  was  damaged 
and  so  otherwise  unmarketable,  was  afforded  at  a  very  low  price  ; 
the  average  market-price  in  New  York  for  the  four  years  next 
preceding  1862  having  been  about  23  cents  per  proof-gallon,  with 
a  minimum  price  during  the  same  time  of  14  cents  per  gallon. 
In  Cincinnati  the  market-price  of  whiskey  for  August,  1 861,  was 
commercially  reported  as  "closing  dull"  at  13  cents  per  gallon. 
The  price  of  alcohol  in  New  York  during  the  period  above 
noted  ranged  from  40  to  60  cents  per  gallon.  Under  such  cir- 
cumstances, the  consumption  of  distilled  spirits  in  the  United 
States  previous  to  the  war,  for  a  great  variety  of  purposes, 
had  become  enormous ;  affording  a  practical  illustration  of  the 
curious  varying  relations  between  prices  and  consumption,  and 
also  of  what  maybe  considered  in  the  light  of  an  axiom  in  politi- 
cal economy,  namely,  that  practically  there  is  almost  no  limit 
to  the  consumption  of  any  useful  commodity,  provided  that 
through  a  reduction  of  cost  or  price  it  is  brought  within  the  pur- 
chasing power  of  those  who  desire  to  consume.  Thus,  for  the 
year  ending  June,  i860,  the  product  of  distilled  spirits  in  the 
United  States,  as  returned  by  the  Census,  was  89,308,581  gal- 
lons (proof-spirit) ;  or  including  alcohol,  90,412,581  gallons  (as 
compared  with  a  present  taxed  product  and  consumption  in 
Great  Britain  of  about  thirty  millions  of  gallons)  ;  and  this  aggre- 
gate, subsequent  investigations  proved,  was  considerably  less, 
rather  than  in  excess  of,  the  actual  production.  The  max- 
imum quantity  of  domestic  distilled  spirits  exported  in  any  one 
year  previous  to  the  war  was  never  in  excess  of  3,000,000  of  gal- 
lons; so  that  the  annual  consumption  of  domestic  spirits  in  the 
United  States  in  i860,  for  all  purposes,  was  at  the  rate  of  nearly 


158  PRACTICAL    ECONOMICS. 

three  gallons  for  every  man,  woman,  and  child  of  the  popula- 
tion. 

It  would  be  an  error,  however,  to  assume  that  all  of  this 
immense  production  of  spirits  was  used  for  intoxicating  pur- 
poses or  in  the  way  of  stimulants,  inasmuch  as  the  extreme 
cheapness  of  proof-spirits  and  of  alcohol  in  the  United  States 
at  the  period  under  consideration  occasioned  their  employment 
in  large  quantities  for  various  purposes  which  were  absolutely 
or  almost  unknown  in  Europe,  where  the  price  of  these  same 
products,  through  the  fiscal  necessities  of  the  various  govern- 
ments, has  always  been  made  so  artificially  high  as  to  greatly 
limit  their  industrial  application.  Thus  one  of  these  employ- 
ments, peculiar  to  the  United  States  at  this  time,  was  the  manu- 
facture of  a  cheap  illuminating  agent  known  as  "  burning-fluid," 
composed  of  one  part  of  rectified  spirits  of  turpentine  mixed 
with  from  four  to  five  parts  of  alcohol,  each  gallon  of  alcohol 
thus  used  requiring  1.88  gallons  of  proof-spirits  for  its  manu- 
facture. The  use  of  this  preparation  in  the  United  States  in 
i860,  in  places  where  coal-gas  was  not  available,  was  all  but  uni- 
versal, and  necessitated  a  production  and  consumption  of  at 
least  twenty-five  millions  of  gallons  of  proof-spirits  per  annum, 
which  in  turn  would  have  required  the  production  and  use 
of  from  ten  to  twelve  millions  of  bushels  of  corn.  And  so 
extensive  was  the  scale  on  which  its  manufacture  was  con- 
ducted, that  in  Cincinnati  alone  the  amount  of  alcohol  required 
every  twenty-four  hours  for  this  industry  was  equivalent  to  the 
distillate  of  12,000  bushels  of  corn.  Here,  then,  had  been  grad- 
ually created  a  new,  peculiar,  and  large  market,  for  one  of  the 
staple  products  of  American  agriculture,  and  also  for  the  pecu- 
liar product — turpentine — of  mainly  one  agricultural  State, 
North  Carolina.  The  excessive  cheapness  of  alcohol  also  led  to 
its  most  extensive  use  for  fuel  in  manufacturing,  and  in  domes- 
tic culinary  operations ;  for  bathing  and  cleaning  ;  for  the  manu- 
facture of  varnishes,  vinegar,  imitation  wines,  flavoring  extracts, 
perfumery,  patent  medicines,  white-lead,  percussion  caps,  hats, 
photographs,  tobacco,  and  a  great  variety  of  other  purposes.  It 
is  also  to  be  noted  as  a  curious  part  of  this  history  that  nearly 
all  preparations,  washes,  and  dyes  for  the  hair,  which  at  that 
time  in  other  countries — as  now  almost  universally — were  pre- 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.     1 59 

pared  almost  exclusively  on  a  basis  of  fats  or  oils  or  some  non. 
spirituous  liquids,  were  in  the  United  States  then  composed  al- 
most wholly  on  a  basis  of  alcohol,  the  comparative  difference  in 
the  price  of  this  article  in  the  United  States  and  Europe  giving 
an  entirely  different  composition  to  products  of  large  consump- 
tion intended  to  effect  a  common  object.  The  transcript  of  the 
sales  of  a  single  distillery  and  rectifying  establishment  in  New 
York  City,  put  in  as  evidence  before  the  U.  S.  Revenue  Com- 
mission of  1865,  showed  sales  in  a  single  year  of  19,040  gallons 
of  alcohol  in  one  case,  and  12,657  m  another,  to  two  manu- 
facturers of  different  popular  hair  washes  and  tonics.  From  the 
same  firm  a  manufacturer  of  an  "extract  of  sarsaparilla"  bought 
in  one  year  81,300  gallons;  and  another  manufacturer  who 
made  a  "pain-killer,"  41,195  gallons.  A  single  firm  of  patent- 
medicine  proprietors  in  Massachusetts  testified  their  consump- 
tion of  distilled  spirits  to  have  averaged  one  hundred  thousand 
gallons  per  annum  ;  while  another  in  Western  New  York,  engaged 
simply  in  the  manufacture  of  a  horse-medicine,  reported  a  con- 
sumption, prior  to  the  imposition  of  internal-revenue  taxa- 
tion, of  upwards  of  50,000  gallons  of  proof-spirits  annually.  In- 
dividual hair-dressers  in  the  large  cities  also  testified  that  the 
use  of  400  gallons  of  alcohol  (equal  to  750  gallons  of  proof- 
spirits)  yearly  in  their  local  business  was  not  an  unusual  circum- 
stance. 

For  the  manufacture  of  imitation  wines  the  demand  for  dis- 
tilled spirits  in  the  United  States  prior  to  1864  was  also  very 
large ;  four  firms  in  the  city  of  New  York  reporting  a  consump- 
of  225,000  gallons  of  pure  spirits  for  this  purpose  during  the 
year  1863.  Large  quantities  of  neutral  or  pure  spirits  were  also 
used  at  the  time  in  the  United  States  for  the  "  fortifying"  of 
cider,  to  prevent  or  retard  acidification — especially  in  the  case 
of  cider  intended  for  export  to  tropical  countries,  to  the  South- 
ern States,  or  to  the  Pacific.  One  distiller  in  Western  New  York 
reported  a  regular  sale,  during  the  year  1862,  of  eight  thousand 
gallons  per  month  for  this  purpose  exclusively. 

The  first  tax  imposed  by  Congress  on  distilled  spirits  of  do- 
mestic production  was  20  cents  per  proof-gallon,  and  went 
into  effect  on  the  1st  of  July,  1862.  This  tax  continued  in 
force  until  March  7th,  1864,  when  the  rate  was  advanced  to 


l6o  PRACTICAL    ECONOMICS. 

60  cents  per  gallon.  On  the  1st  of  July,  less  than  four 
months  subsequently,  the  rate  was  again  raised  to  $1.50  per  gal- 
lon, and  on  the  1st  of  January,  1865,  six  months  later,  it  was 
further  and  finally  advanced  to  $2  per  gallon.  In  addition  to 
these  specific  taxes  heavy  additional  taxes  on  the  mixing,  com- 
pounding, and  wholesale  and  retail  dealing  in  spirits  were  also 
imposed  in  the  way  of  licenses. 

The  immediate  effect  of  this  imposition  and  rapid  increase 
of  internal  taxes  upon  distilled  spirits  was  a  series  of  industrial 
and  commercial  phenomena,  more  remarkable  than  anything  of 
the  kind  before  recorded  in  economic  history  ;  and  yet  so  com- 
pletely was  the  attention  of  the  American  people  engrossed  at 
this  time  in  other  and  greater  events — events  affecting  their 
very  existence  as  a  nation — that  the  results  referred  to  did  not 
so  much  as  create  a  ripple  in  public  opinion,  and  were  barely 
adverted  to,  if  noticed  at  all,  in  the  columns  of  the  public  press. 
In  short,  the  influence  of  these  taxes  was  to  entirely  and  rapidly 
revolutionize  great  branches  of  domestic  industry,  and  in  some 
instances  to  utterly  destroy  them.  Thus,  for  example,  the 
manufacture  of  burning-fluid  entirely  ceased,  inasmuch  as  the 
rise  in  the  price  of  alcohol  from  40  cents  to  $4  and  upwards  per 
gallon,  together  with  the  cessation  of  the  supply  of  turpentine 
from  North  Carolina, — then  a  State  in  rebellion, — rapidly  con- 
verted it  from  the  cheapest  to  the  dearest  of  all  illuminating 
agents.  Here,  also,  very  curiously,  the  public  did  not  experi- 
ence any  great  inconvenience  by  reason  of  this  change  ;  for  by 
one  of  those  happy  and  unexpected  occurrences,  almost  in  the 
nature  of  accidents,  which  have  so  often  characterized  the  his- 
tory of  the  United  States,  and  which  some  are  pleased  to  regard 
as  "  special  providences,"  it  so  happened  that  the  discovery  of 
vast  and  natural  supplies  of  petroleum  in  Pennsylvania,  and  the 
practical  application  of  its  distillates  for  illuminating  purposes, 
was  almost  coincident  in  point  of  time  with  the  compulsory  dis- 
use of  burning-fluid  ;  while  the  fact  that  the  new  material  pos- 
sessed great  advantages  in  point  of  cheapness  and  effect  over 
the  old  caused  the  change  in  popular  use  to  be  effected  volun- 
tarily and  with  great  rapidity.1     As  a  further  illustration  of  the 

1  The  first  company  organized  to  supply  petroleum  in  the  United  States  was 
in  1854;  but  it  was  not  until  1 861-2  that  the  product  began  to  constitute  an  im- 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     l6l 

compensations  which  invariably  attend  the  losses  immediately 
contingent  upon  industrial  progress,  and  through  the  disuse  of 
old  products,  methods,  and  machinery,  it  may  be  stated  that,  al- 
tho  the  manufacture  of  burning-fluid  ceased,  the  business  of  col- 
lecting, preparing,  and  exporting  petroleum  rapidly  became  one 
of  the  most  important  in  the  country ;  while  the  demand  at 
home  and  abroad  for  the  lamps  and  their  appurtenances  devised 
and  adapted  in  the  United  States  for  the  use  of  the  distillates 
of  petroleum  was  alone  sufficient  to  employ  the  entire  manu- 
facturing capacity  of  all  the  glass-works  of  the  country  for  a 
term  equivalent  to  two  entire  years. 

Druggists  and  pharmaceutists  in  the  United  States  estimat- 
ed the  reduction  in  the  use  of  alcohol  in  their  general  business, 
consequent  upon  its  increased  cost  from  taxation,  at  from  one 
third  to  one  half.  The  popular  hair  preparations  into  which 
alcohol  entered  largely  as  a  constituent  vanished  from  the  mar- 
ket ;  and  manufacturers  of  patent  medicines  and  cosmetics  gen- 
erally abandoned  their  old  preparations  and  adopted  new  ones. 
The  manufacturer  of  horse-medicines,  who  used  50,000  gallons 
of  spirits  in  1863,  wofully  testified  in  1865  that  his  business 
was  destroyed.  ■  Varnish-makers,  who,  when  alcohol  could  be 
purchased  at  from  50  to  60  cents  per  gallon,  used  it  in  large 
quantities,  were  of  necessity  compelled  to  entirely  or  in  a  great 
degree  abandon  its  use  when  the  price  rose  to  $4  per  gallon  and 
upward  ;  and  yet  special  investigation  showed  that  the  quantity 
of  varnish  manufactured  was  not  correspondingly  reduced  ;  in- 
asmuch as  the  manufacturers  at  once  substituted  other  and 
cheaper  solvents  for  their  gums,  especially  the  naphthas  or  light 
distillates  of  petroleum  which  were  then  opportunely  seeking 
uses  and  a  market.  Within  a  comparatively  few  years,  also, 
the  continued  high  price  of  alcohol  has  led  the  manufacturers  of 
quinine  to  substitute  the  distillates  of  petroleum  as  a  solvent 
for  the  alkaloids  in  the  cinchona  barks ;  and  with  such  success 
that  it  is  doubtful  whether  the  old  processes  would  be  again 

portant  article  of  commerce;  and  it  was  some  considerable  time  later  before  its 
distillates  were  made  sufficiently  cheap  and  good  to  induce  anything  like  general 
use.  The  average  price  of  burning-fluid  from  1856  to  1861  was  from  45  to  65 
cents  per  gallon.  The  average  price  of  refined  petroleum  in  1863  was  51  cents  ; 
and  the  domestic  consumption  about  500,000  barrels. 


1 62  PRACTICAL    ECONOMICS. 

adopted,  even  if  alcohol  could  again  be  afforded  at  its  former 
prices.  The  manufacturers  of  hats,  who  had  before  used  a 
composition  of  gum-shellac  dissolved  in  alcohol  almost  exclu- 
sively for  stiffening  the  hat  "  bodies"  or  "foundations,"  and 
were  thus  large  consumers  of  alcohol,  were  compelled  to  aban- 
don its  use,  and  for  a  time  were  subjected  to  no  little  incon- 
venience. But  even  here  substitutes  were  soon  found ;  and  in 
addition  the  use  of  cloth  as  a  material  for  hats,  in  the  place  of 
felt  and  silk  plush,  was  largely  introduced  and  became  popular. 
The  manufacture  of  vinegar  from  whiskey,  by  reason  of  the 
great  advance  in  the  price  of  distilled  spirits,  was  also  in  a  large 
degree  broken  up  ;  and  this  in  turn  had  the  effect  to  destroy  a 
large  export  business  of  this  article,  as  well  as  to  increase  the 
market-price  of  pickles  to  the  extent  of  from  one  third  to  one 
half ;  and  also  to  seriously  affect  the  manufacture  and  cost  of 
white-lead,  and  occasion  extensive  importations  of  this  article 
from  other  countries. 

The  business  of  fortifying  cider  for  movement  or  export  to 
the  Pacific  coast  and  to  the  tropics,  before  referred  to,  as  well 
as  the  manufacture  of  imitation  wines  and  of  cheap  perfumery, 
was  likewise  very  seriously  interfered  with  or  destroyed,  as  was 
also  the  business  of  manufacturing  the  fluid  extracts  of  the  me- 
dicinal principles  of  plants  ;  and  it  was  represented  to  the  Reve- 
nue Commission  by  members  of  the  American  Pharmaceutical 
Association  that  there  was  a  marked  tendency  throughout  the 
country  on  the  part  of  physicians  and  others  to  abandon  the 
use  of  alcoholic  extracts  and  fall  back  upon  the  old  custom  of 
employing  crude  drugs,  decoctions,  and  syrups  as  substitutes ; 
and  further,  that  there  was  an  attempt  to  keep  down  the  price 
to  the  consumer  of  many  officinal  preparations  which  absolutely 
required  the  use  of  alcohol,  by  putting  them  up  at  less  than 
their  proper  officinal  strength ;  thus  inflicting  a  sanitary  injury 
upon  the  whole  community.  Finally,  in  all  branches  of  the  in- 
dustrial arts,  where  the  continued  use  of  distilled  spirits  was  in- 
dispensable, and  no  cheaper  substitute,  could  be  found,  the  ut- 
most economy  in  its  use  was  everywhere  practised. 

Another  curious  incident  connected  with  this  history  was 
that  the  curators  of  the  leading  museums  of  the  country — ana- 
tomical or  natural  history — attached  to  institutions  of  learning, 


OUR    EXPERIENCE  IN   TAXING  DISTILLED  SPIRITS.     1 63 

memorialized  Congress  to  the  effect  that,  owing  to  the  high 
price  of  alcohol,  they  could  not  afford  to  make  good  the  waste 
of  this  substance  (by  evaporation  and  leakage)  as  employed  by 
them  for  scientific  purposes;  and  that  in  consequence  many  im- 
portant collections  were  becoming  greatly  impaired  in  value,  and 
the  progress  of  scientific  discovery  and  research  greatly  impeded. 
And  Congress,  recognizing  the  desirability  of  giving  relief  in  re- 
spect to  this  matter,  empowered  the  Secretary  of  the  Treasury 
to  grant  permits  to  incorporated  American  institutions  of  learn- 
ing to  withdraw  spirits  from  bond  in  specified  quantities  for 
scientific  purposes  without  payment  thereon  of  the  internal- 
revenue  taxes. 

It  seems  desirable  to  state  here  that  the  facts  as  above  de- 
tailed, as  well  as  some  others  to  be  presented  hereafter,  were 
the  results  of  the  investigations  of  a  Commission  authorized  by 
Congress  in  the  winter  of  1865  for  the  purpose  of  inquiring  into 
the  condition  and  sources  of  the  national  revenue,  and  the  best 
methods  of  raising  revenue  for  the  Federal  Government  by 
taxation,  with  full  power  to  summon  witnesses  and  take  testi- 
mony ;  and  that  of  this  Commission  the  writer  was  the  chairman. 
It  will  be  interesting  also  at  this  point  to  diverge  somewhat 
from  the  thread  of  this  history  and  consider  what  information 
is  available  concerning  the  present  and  past  consumption  of  dis- 
tilled spirits  in  the  United  States  for  drinking  purposes;  and 
also  to  some  extent  the  experience  of  other  countries  in  respect 
to  the  same  matter. 

Previous  to  the  imposition  of  internal  taxes  by  the  Federal 
Government  in  1862,  raw  or  common  whiskey  was  retailed 
freely  throughout  the  country  at  from  seven  to  fifteen  cents  per 
quart,  or  from  twenty-five  to  fifty  cents  per  gallon.  At  these 
low  prices,  it  was  within  the  ability  of  every  laborer  to  indulge 
freely,  and  this  ability  was  largely  taken  advantage  of,  especially 
at  the  close  of  a  week  or  at  the  periodical  settlement  of  wages. 
It  was  also  a  very  general  custom  in  many  parts  of  the  country 
for  agriculturists  to  buy  whiskey  by  the  barrel,  for  the  use  of 
their  farming  help,  and  to  use  it  freely  as  a  beverage  during 
the  season  of  harvesting.  In  short,  previous  to  i860  a  man 
could  undoubtedly  get  drunk  in  the  United  States  with  a  less 
expenditure  of  money  than  in  any  part  of  the  civilized  world. 


l&4  PRACTICAL    ECONOMICS. 

But  it  may  well  be  doubted  whether,  with  these  increased  facili- 
ties, drunkenness  increased  in  the  United  States  in  any  greater 
ratio,  or  more  rapidily,  than  in  other  countries,  where  the  facili- 
ties for  obtaining  intoxicating  liquors  were  notably  less.  On 
the  contrary,  the  obtainable  evidence  is  all  the  other  way. 
Thus  at  the  time  of  the  formation  of  the  constitution,  or  more 
precisely  in  1 790,  the  domestic  production  and  consumption  of 
distilled  spirits  in  the  United  States,  as  before  stated,  was  about 
6,000,000  of  gallons  per  annum  ;  which,  with  the  then  population 
of  3,929,000,  would  be  in  the  ratio  of  about  one  and  a  half  gal- 
lons per  capita.  As  there  were  at  that  time  in  the  country  no 
industrial  establishments  or  processes  requiring  an  extensive 
employment  of  alcohol,  it  is  probable  that  nearly  the  whole 
domestic  production  of  this  article  was  then  used  for  drinking 
purposes;  a  conclusion  which  finds  support  in  the  circumstance 
that  at  the  time  referred  to,  and  for  many  years  thereafter,  al- 
most every  county,  and  indeed  almost  every  town,  had  its  little 
distillery  of  spirits  from  fruits  or  grain  ;  the  market  for  the  pro- 
ducts of  which,  in  the  absence  of  facilities  for  cheap  transporta- 
tion, must  of  necessity  have  been  largely  local.  At  the  time  of 
the  whiskey  insurrection  in  1794,  the  number  of  distilleries  in 
Pennsylvania  alone  was  reported  at  5000.  Furthermore,  at  this 
time  everybody  drank,  socially  and  in  public,  privately  and  at 
home  ;  men  and  women,  young  and  old,  the  clergymen  and 
their  parishioners,  farmers  and  their  laborers.  The  last  half- 
century  has,  however,  through  the  agitation  of  the  temperance 
question,  the  general  progress  of  civilization  and  refinement,  and 
the  extensive  introduction  and  use  of  the  malt  liquors,  not  only 
worked  a  change  in  the  social  habits  of  Americans, — a  change 
little  understood  by  the  present  generation, — but  has  also  un- 
questionably largely  decreased  the  average  consumption  of  dis- 
tilled spirits  in  the  country.  From  1790  to  1840  the  Census 
returns  in  regard  to  production  are  entitled  to  but  little  respect ; 
but  the  whole  weight  of  evidence  is  to  the  effect  that  the  num- 
ber of  distilleries  and  their  products  steadily  increased  during 
this  period,  and  fully  kept  pace  with  the  population.  In  1840 
the  Census  returned  the  annual  domestic  product  of  distilled 
liquors  at  from  40,000,000  to  50,000,000  gallons.  The  popula- 
tion at  that  time  was  17,069,000;  while  in  1880,  with  a  popula- 


<i 


uirivi 


Oil' 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.     165 

tion  of  50,155,000,  the  Internal  Revenue  Bureau  was  only  able 
to  take  cognizance  for  assessment  and  tax-collection  of  an  an- 
nual production  of  62,132,000  gallons  of  proof-spirits,  or  9,000,- 
000  gallons  less  than  in  1870,  when  the  population  was  12,000,- 
000  smaller.  (But  this  notable,  increase  in  1870,  as  compared 
with  1880,  and  a  larger  population,  is  undoubtedly  referable  to  a 
greatly  increased  consumption  of  spirits  for  industrial  purposes, 
consequent  upon  a  reduction  in  price  and  taxation  of  near  fifty 
per  cent.)  For  the  year  1883,  with  an  aggregate  population  of 
approximately  56,000,000,  the  number  of  gallons  of  proof- 
spirits  of  all  kinds  on  which  the  internal-revenue  tax  was  paid 
was  returned  at  76,762,063  ;  but  a  considerable  part  of  this  pro- 
duct undoubtedly  represented  spirits  which  paid  the  tax  and 
were  taken  out  of  bond  by  necessity,  through  the  expiration  of 
the  permissible  bonded  period,  and  not  by  reason  of  any  in- 
creased coincident  demand  on  the  part  of  the  public  for  con- 
sumption. For  the  year  1883  the  quantity  of  spirits  produced 
and  deposited  in  the  distillery  warehouses  was  74,013,303  gal- 
lons, as  compared  with  a  similar  production  and  deposit  for  the 
year  1882  of  105,853,161.  And  the  extent  to  which  production 
had  exceeded  any  legitimate  demand  for  domestic  consumption 
is  indicated  by  the  circumstance  that  the  taxable  product  re- 
maining in  the  bonded  warehouses  on  the  30th  of  June,  1883, 
after  all  demands  for  domestic  consumption  had  been  supplied, 
amounted  to  the  large  aggregate  of  80,499,993  gallons.  That 
the  Federal  authorities  do  not  succeed  in  collecting  the  tax  on 
all  the  distilled  spirits  annually  produced  in  the  United  States 
is  absolutely  certain  ;  but  making  a  large  allowance  for  evasions, 
and  supposing  the  present  annual  consumption  for  all  purposes 
to  aggregate  as  high  as  even  eighty  millions  of  proof-gallons,  it  fol- 
lows that  while  the  population  of  the  country  has  increased  nearly 
three-fold,  the  amount  of  spirits  distilled  for  domestic  consump- 
tion in  the  same  period,  under  influence  of  increased  price  through 
taxation  and  other  agencies,  has  probably  not  more  than  doubled. 
The  evidence,  therefore,  is  conclusive  of  a  diminished  consump- 
tion, comparing  1840  with  the  results  of  1880  and  1883.  But  this 
is  not  all.  The  use  of  alcohol  in  the  arts  and  manufactures  has 
enormously  increased  since  1840.  Whole  trades  in  which  it  is 
largely  used  have  since  come  into    existence  ;  and  altho   the 


l66  PRACTICAL    ECONOMICS. 

amount  now  so  consumed  is  absolutely  and  comparatively  less 
than  in  i860,  when  distilled  spirits  were  untaxed,  yet  the  quan- 
tity so  used  for  industrial  purposes  is  still  large,  and  every  gal- 
lon so  applied  reduces  the  proportion  which  can  be  used  for 
stimulants.  If  we  assume  the.  present  annual  consumption  of 
domestic  distilled  spirits  in  the  United  States  to  be  about 
70,000,000  gallons ;  and  about  twelve  per  cent,  or  8,400,000 
gallons,  of  this  amount  be  used  for  industrial  or  scientific  pur- 
poses, or  is  lost  by  leakage  and  other  casualties,1  then  the 
use  of  domestic  spirits  for  drink  in  this  country  must  be  at  pres- 
ent at  the  rate  of  about  1.10  gallons  per  capita  annually  for  the 
entire  population.  To  this  must  also  be  added  the  consump- 
tion of  foreign  or  imported  spirits — the  amount  of  which  exclu- 
sive of  wines  is  not,  however,  very  considerable,  less  than  a  million 
and  a  half  of  proof-gallons  having  been  imported  during  the 
fiscal  year  1882-3.  But  adding  this  amount  to  the  consump- 
tion of  domestic  distilled  spirits  before  assumed,  the  total  con- 
sumption of  spirits — wine,  cider,  and  fermented  liquors  excepted 
— by  the  population  of  the  United  States,  would  therefore  appear 
to  be  at  present  at  the  rate  of  about  1.14  gallons  per  capita. 
During  the  same  year  the  importation  of  wines  was  returned  at 
6,187,520  gallons  in  casks  and  195,957  dozen  bottles.  The  con- 
sumption of  champagnes  and  other  sparkling  wines  of  foreign 
production  would  seem  to  be  on  the  increase  in  the  United 
States;    the   value    of   the    importations    for    1883     being    re- 

1  The  amount  of  leakage  allowed  during  the  fiscal  year  1883  by  the  Govern- 
ment, on  domestic  distilled  spirits  withdrawn  from  warehouse,  was  2,291,013  gal- 
lons, in  addition  to  184,770  gallons  lost  by  casualty,  theft,  etc.  During  the  same 
year  28,725  gallons  of  alcohol  were  withdrawn  from  warehouse  free  of  tax  for 
the  use  of  colleges  and  institutions  of  learning,  and  22,359  a^so  f°r  tne  use  °f  the 
United  States. 

In  1882  the  Internal  Revenue  Bureau  estimated  the  amount  of  alcohol 
annually  used  in  the  arts  and  manufactures  in  the  United  States  to  be  equal  to 
4,269.978  proof-gallons.  This  estimate  was  not,  however,  founded  on  returns  from 
all  the  collection  districts  in  the  country,  and  on  its  face  was  based  on  little  other 
than  absurd  guesses;  country  districts  of  Tennessee,  for  example,  being  assigned 
a  consumption  of  from  13,000  to  19,000  gallons,  while  the  annual  consumption 
of  the  22d  District  of  Pennsylvania,  which  comprises  the  city  of  Pittsburg,  was 
put  down  at  only  260  gallons,  with  the  subjoined  opinion  that  this  quantity  would 
not  be  likely  to  be  increased  if  the  tax  on  distilled  spirits  were  to  be  entirely 
removed. 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.     167 


turned  at  $4,603,722,  as  compared  with  a  similar  valuation  of 
$3,028,309  in  1882  and  of  $2,883,668  in  1881. 

In  Great  Britain,  where,  owing  to  a  rigid  enforcement  of 
their  excise  laws,  the  domestic  production  and  consumption  of 
distilled  spirits  is  more  accurately  known  than  in  any  other  coun- 
try except,  possibly,  Russia,  the  amount  of  revenue  collected 
from  the  direct  tax  on  this  article  for  the  year  ending  March, 
1883,  was  £14,21 1,490,  or  $71,057,450;  indicating  an  annual 
consumption  (exclusive  of  spirits  allowed  to  be  used  for  indus- 
trial purposes  after  having  been  made  unfit  for  drinking  pur- 
poses by  mixing  with  naphtha  or  wood-spirit)  of  28,422,980  im- 
perial gallons.  As  compared  with  the  preceding  year,  188 1-2, 
there  was  a  decrease  in  consumption  of  294,270  gallons  in 
England,  and  of  46,254  in  Scotland ;  while  in  Ireland,  notwith- 
standing an  estimated  decrease  of  population,  there  was  an  in- 
creased consumption  of  245,667  gallons. 

The  consumption  per  capita  in  Great  Britain  at  different 
periods  of  the  various  beverages  which  are  there  made  subject  to 
taxation  is  shown  in  the  following  table  derived  from  the  "  Re- 
port of  the  [British]  Commissioners  of  Inland  Revenue"  for 
1882-3. 


British  spirits,  gallons  per  head 

Duty  increased  in  i860. 
Foreign  and  colonial  spirits,  gallons  per  head. . . 

Duty  reduced  in  i860. 
Foreign  wines,  gallons  per  head 

Duty  reduced  in  i860. 

Beer,  barrels  per  head 

Tea,  pounds  per  head 

Duty  reduced  from  is.  i\d.  to  bd.  per  pound. 

Coffee,  pounds  per  head 

Cocoa,  pounds  per  head 


1852. 

1862. 

1872. 

.916 

.644 

.844 

.187 

.177 

.285 

.262 

.335 

.530 

.608 

2.140 

.661 
2.694 

.885 
4.014 

1.274 
.123 

1. 108 
.134 

•994 
.247 

1882. 


.809 

.236 

.409 

.766 
4.679 

.906 
•339 


It  appears,  therefore,  from  the  above  table,  that  the  increase 
of  duty  on  British  spirits  has  been  followed  by  decreased  con- 
sumption, while  in  the  case  of  foreign  spirits  and  wines,  and 
tea,  a  diminution  of  duty  has  been  followed  by  a  large  increase 
of  consumption,  tea  being  the  most  notable  example  ;  and  also 
that  the  present  per-capita  consumption  of  strong  spirituous 
liquors,  domestic  and  foreign,  in  Great  Britain  and  the  United 
States — 1.04  and   1.14  gallons  respectively — is   not   materially 


1 68  PRACTICAL    ECONOMICS. 

different.  It  must,  however,  be  borne  in  mind,  in  consid- 
ering this  subject,  that  malt  liquors  are  used  in  the  place  of 
spirits  to  a  much  greater  extent  in  Great  Britain  than  in  the 
United  States.  Thus  for  the  year  1880  the  British  consump- 
tion of  beer  is  stated  by  Mr.  William  Hoyle,  an  English  special- 
ist on  this  subject,  to  have  amounted  to  905,088,978  gallons, 
costing  £67,881,678.  The  tables  of  the  "Financial  Reform 
Almanac"  for  1884  give  the  per-capita  consumption  of  beer  in 
Great  Britain  as  27.8  gallons  in  1881  and  27.6  in  1882.  For 
the  year  1882  the  official  estimate  (see  table  above  given)  of 
the  domestic  consumption  of  malt  liquors  was  .y66  of  a  barrel 
per  capita.  In  the  United  States,  on  the  other  hand,  where  the 
manufacture  and  sale  of  malt  liquors  is  also  made  subject  to  a 
tax,  and  is  so  brought  under  the  supervision  of  the  Federal 
Government,  the  number  of  barrels  of  such  liquors  returned  as 
manufactured  during  the  fiscal  year  1882-3  was  17,757,886; 
which  quantity  in  turn,  reckoning  31  gallons  to  the  barrel, 
would  represent  5  50,494,000  gallons.  Adding  1,500,000  gallons  to 
represent  the  excess  of  imports  over  exports  of  malt  liquors, 
the  consumption  of  such  liquors  by  the  people  of  the  United 
States  for  the  year  1883  would,  therefore,  appear  to  have  been 
at  the  rate  of  nine  and  seven  tenths  (9.68)  gallons  per  capita, 
as  compared  with  a  per-capita  consumption  in  Great  Britain 
for  the  same  period  of  27.6  gallons.  If  allowance  be  now  made, 
as  there  should  be,  for  the  quantity  of  spirit  contained  in  this 
excess  of  fermented  liquors  produced  and  consumed  in  Great 
Britain  over  and  above  the  amount  of  similar  liquors  consumed 
in  the  United  States,  then  the  per-capita  estimate  of  the  con- 
sumption of  spirits  in  the  former  country  would  have  to  be  fixed 
at  a  somewhat  greater  figure  than  the  ratio  of  1.04  above  given. 
From  the  above  facts  and  experiences  the  following  deduc- 
tions of  general  interest  are  warranted.  First,  that  the  con- 
sumption of  distilled  spirits  and  fermented  liquors  in  Great 
Britain  is  not  increasing  in  proportion  to  the  increase  of  popula- 
tion, but  is  absolutely  decreasing.  Thus,  with  taxation  remain- 
ing unchanged,  the  British  revenue  from  duties  on  imported 
spirits  has  declined  from  £6,141,336  in  1876  to  £5,331,561  in 
1879,  and  to  £4,365,383  in  1883,  or  at  an  average  rate  of  about 
$1,250,000  per  annum.     In  the  case  of  the  excise  the  decline 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     1 69 

has  been  somewhat  smaller,  but  nevertheless  most  significant ; 
namely,  from  £15,154,327  in  1876  to  £14,211,490  in  1883,  or  at 
an  average  of  $670,000  per  annum.  For  the  year  1883  tne 
British  revenue  from  beer  was  also  less  by  £269,000  ($1,445,000) 
than  had  been  anticipated.  Commenting  on  these  results,  the 
British  Commissioners  of  the  Inland  Revenue  in  their  report  for 
1883  say: 

"  The  decrease  in  the  consumption  [of  spirits]  in  England  and  Scotland 
appears  comparatively  small,  but  it  becomes  more  significant  of  altered 
habits  when  considered  with  the  natural  increase  which  must  have  taken 
place  in  the  population.  There  cannot  be  any  doubt  that  in  some  locali- 
ties the  spread  of  temperance  principles  has  already  caused  a  marked  di- 
minution in  the  consumption  of  intoxicating  liquors,  and  the  tendency  is 
still  increasing ;  .  .  .  .  the  past  year  having  been,  apparently,  one  of  un- 
usual progress  in  this  direction." 

The  decrease  in  the  revenue  from  beer  for  the  year  1883  the 
Commissioners  attribute  to  some  extent  to  the  influence  of  tem- 
perance societies,  but  especially  to  the  failure  of  the  hop-crops 
throughout  the  world,  which  increased  the  price  of  hops  from  an 
average  of  £6  10s.  to  above  £22  per  hundred-weight. 

Commenting  on  this  falling-off  of  the  imperial  revenues  from 
wine  and  spirit  taxes,  the  Chancellor  of  the  Exchequer,  in  his 
budget  statement  for  1883,  stated  that  in  comparison  with  the 
receipts  from  these  sources  in  1874-5,  and  allowing  for  the  in- 
crease of  population,  the  product  for  1883  ought  to  have 
amounted  to  £24,840,000  ;  whereas  it  was,  with  the  same  rates, 
but  £19,840,000;  or  in  other  words,  he  showed  that  the  domes- 
tic consumption  of  wine  and  spirits  during  the  period  under 
consideration  "  had  fallen  off  to  an  amount  represented  by  five 
millions  of  duty,  and,  including  the  beer  duties,  the  three  had 
fallen  off  to  an  amount  represented  by  ^d.  on  the  income-tax." 
During  the  same  period  the  population  of  the  kingdom  had  in- 
creased not  less  than  4,000,000. 

The  notable  decrease  in  the  consumption  of  foreign  wines  in 
Great  Britain  since  1874-5,  indicated  by  the  decrease  in  the  re- 
ceipts of  revenue  from  the  duties  imposed  on  their  import 
(£1,789,855  in  1874,  as  compared  with  £1,293,833  in  1883,  repre- 
senting in  quantity  a  change  from  about  18,500,000 to  14,000,000 


170  PRACTICAL    ECONOMICS. 

gallons),  finds  concurrent  support  in  the  testimony  of  social  ex- 
perience. "Something  of  this  falling-off,"  says  All  the  Year 
Round,  "  is  due,  perhaps,  to  a  distaste  for  wine  as  a  beverage, 
brought  about  by  a  general  deterioration  in  quality,  and  by  the 
enormous  adulteration  of  which  wine  is  the  subject.  But  there 
is  also  a  change  in  the  social  habits  of  the  wealthier  classes.  In- 
stead of  the  popping  of  champagne-corks  we  have  the  fizzing  of 
mineral  waters.  The  hospitable  suppers  where  wine  and  wit 
flowed  freely  are  things  of  the  past  ;  the  balls  of  other  days, 
when  the  fair  dancers  refreshed  themselves  so  freely  with  spark- 
ling wines,  are  succeeded  by  parties,  where  nothing  is  provided 
beyond  tea  and  lemonade." 

Commenting  also  on  these  reductions  in  the  receipts  of  the 
British  national  revenues  from  the  taxes  on  liquors,  the  Lon- 
don Standard  says : 

"  The  change  indicated  by  them  in  the  social  habits  of  our  population 
is  enormous.  Some  of  these  were  mentioned  by  Mr.  Caine  in  his  address 
to  the  Central  Temperance  Association.  Thus,  to  take  a  single  instance, 
commercial  travellers  who,  only  fifteen  years  ago,  were  called  upon  to  pay 
at  hotels  for  a  bottle  of  wine  whether  they  drank  it  or  not — being  charged 
in  consideration  of  this  usage  only  a  shilling  for  their  dinner — are  charged 
now  three  shillings  for  that  meal,  but  are  not  expected  to  order  anything 
for  *  the  good  of  the  house.'  It  is  to  be  feared  that  in  most  great  commer- 
cial cities,  furnished  as  they  are  with  their  wine  '  shades  '  and  subterranean 
drinking-saloons,  there  is  still  a  good  deal  too  much  tippling  at  odd 
hours.  But,  on  the  whole,  no  one  can  shut  his  eyes  to  the  fact  that  there 
exists  a  strong  and  growing  public  opinion  against  drunkenness  even 
among  those  who  are  less  rigidly  abstemious  than  might  be  desirable.  For 
the  first  time  in  the  history  of  this  country,  intoxication,  irrespective  of  the 
social  level  on  which  it  may  be  seen,  carries  with  it  a  lasting  stigma.  The 
whole  tendency  of  the  day  is  opposed  to  excessive  drinking,  The  tem- 
perance movement  is  not  only  making  a  great  number  of  teetotallers,  but 
influencing  those  who  are  not  abstainers  greatly  to  decrease  the  amount 
they  take.  At  the  great  majority  of  dinner-parties  the  quantity  of  wine 
taken  after  the  ladies  have  left  the  room  is  very  small ;  and  if  Thackeray 
were  to  rewrite  Chapter  X.  in  his  '  Book  of  Snobs,'  he  would  represent 
Captain  Rag  and  Ensign  Famish  as  ordering  a  'lemon-squash '  in  the 
small  hours,  rather  than  a  sixth  glass  of  whiskey-punch." 

But  the  points  of  interest  in  connection  with  this  matter  are 
not  yet  exhausted.    It  has  long  been  the  aim  of  the  Chancellors 


OUR  EXPERIENCE  IJV   TAX  TNG  DISTILLED   SPIRITS.     171 

of  the  British  Exchequer  to  obtain  the  largest  possible  revenue 
from  spirituous  liquors,  to  the  assumed  concurrent  relief  of  all 
other  forms  of  business  and  commodities  from  taxation  ;  and  the 
proportion  of  the  annual  revenues  of  the  United  Kingdom  de- 
rived of  late  years  from  these  sources  is  probably  not  recog- 
nized by  the  public,  or  even  by  economists  and  financiers 
generally.  For  the  period  1859  to  1865  the  proportion  of  the 
tax  revenue  of  Great  Britain  derived  from  spirituous  liquors  was 
in  the  ratio  of  37J  per  cent  to  62  from  all  other  sources.  From 
1869  to  1873  the  ratio  was  46  from  the  former  to  53  from  the 
latter;  while  from  1874-5  to  1879-80,  51  per  cent  of  all  British 
taxes,  except  the  income-tax,  was  levied  on  liquors,  and  49 
per  cent  on  all  other  sources.  But  since  1880  there  has  been 
a  reaction,  and  in  1882  the  proportion  had  changed  to  47  from 
liquors  and  53  from  other  sources.  The  British  Exchequer  is 
therefore  confronted  with  a  new  problem,  namely,  What  provi- 
sion is  to  be  made  if  this  decrease  of  revenue  from  a  decrease  in 
the  consumption  of  spirituous  liquors  by  the  British  public  is 
to  continue?  Such  a  continued  decrease  being  not  improbable, 
there  are  but  two  courses  open,  new  taxes  or  diminished  ex- 
penditures ;  and  the  latter,  in  view  of  the  Eastern  complications 
of  Great  Britain,  does  not  seem  to  be  possible.  But  for  the 
present  it  is  not  a  little  curious  to  find  that  Ireland  comes  to  the 
rescue,  and  by  increasing  her  consumption  of  whiskey  to  the  ex- 
tent, even  with  a  diminished  population,  of  245,667  gallons  in 
the  single  year  1883,  helps  relieve  from  financial  difficulties  the 
treasury  of  her  Saxon  oppressor. 

Commenting  on  this  reduction  in  the  consumption  of  spirits 
in  Great  Britain,  its  causes  and  effects  on  the  social  condition  of 
the  mass  of  the  British  people,  Mr.  Gladstone  in  his  budget 
speech  in  April,  1882,  said: 

"  If  this  diminution  of  consumption  is  going  on,  and  if  a  main  cause  of 
this  diminution  is  the  foundation  of  those  valuable  and  useful  institutions 
known  all  over  the  country — I  believe,  in  all  the  great  towns  or  in  most  of 
them,  and  even  in  many  country  places — as  coffee  and  cocoa  houses,  we 
ought  to  see  a  large  increase  of  revenue,  at  least,  from  other  sources.  But 
that  increase  we  do  not  find.  That  is  a  curious  fact.  I  am  not  going  to 
include  tea,  because  tea,  after  all,  is  not  much  used  in  these  public  places. 
The  revenue  derived  in  1867-8  jointly — I  will  not  give  all  the  details— from 


172  PRACTICAL    ECONOMICS. 

chicory,  cocoa,  and  coffee,  was  ,£523,000.  The  revenue  derived  from  the 
same  sources  in  1874-5  nad  fallen  to  ^3 10,000;  but  then,  in  the  first  place, 
the  movement  adverse  to  alcoholic  liquors  had  not  then  commenced,  and. 
in  the  second  place,  a  very  large  reduction  had  been  made  on  the  coffee 
duty,  which  in  1867  yielded  £390,000;  but  it  was  reduced  in  1872  from  3d. 
to  \\d.  per  pound,  and  in  1874  it  only  yielded  £207,000.  But  while  this 
great  movement  adverse  to  alcohol,  which  has  been  so  eminently  favorable 
to  both  coffee  and  chicory,  has  been  at  work  since  1874-5,  U  has  not  pro- 
duced the  slightest  rally  in  the  revenue  from  coffee,  but,  on  the  contrary, 
during  the  last  seven  years  there  has  been  a  further  diminution  on  coffee. 
In  1874  the  coffee  duty  was  £^207, 000 ;  in  1881  it  was  only  ^189,000;  and 
altho  the  chicory  duty  had  been  slightly  increased,  it  only  increased 
by  ;£8ooo,  and  did  not  make  up  the  whole  difference.  The  cocoa  duty 
had  increased  somewhat,  from  ,£40,000  to  £^46,000;  but  the  joint  yield  of 
these  three  articles,  which  in  1874  was  £^3 10,000,  was  only  £306,000  in  1881. 
When  we  turn  to  tea  the  case  is  very  different.  There  it  is  not  in  the  tea 
houses,  but  the  domestic  use  of  tea  that  is  advancing  at  such  a  rate  that 
there  you  have  a  powerful  champion  able  to  encounter  alcoholic  drink  in 
a  fair  field  and  to  throw  it  in  fair  fight.  The  revenue  on  tea,  which  in 
1867  was  ^3,350,000,  had  risen  in  1874  to  ,£3,875,000  and  in  1881  to 
£^4,200,000.  The  increase  of  the  population  during  that  period  of  14  years 
was  4,900,000.  But  there  was  no  corresponding  augmentation  in  the  reve- 
nue from  coffee  and  chicory.  One  other  circumstance  in  connection  with 
this  state  of  facts  and  with  the  great  diminution  in  alcoholic  drinks  I  have 
ventured  to  lay  before  the  committee ;  for  certainly  I  do  not  hesitate  to 
say  that  I  think  we  can  trace  the  operation  of  this  diminution  in  the  use 
of  alcoholic  drinks  precisely  where  we  should  wish  to  trace  it — that  is,  in  the 
augmented  savings  of  the  people.  I  will  show  what  are  these  savings  as  far 
as  they  come  under  the  cognizance  of  the  government,  and  I  hope  that 
forms  a  very  small  portion  of  those  savings,  but  at  the  same  time  for  the 
purposes  of  comparison  it  is  perfectly  effectual.  I  look  first  to  the  old 
savings  banks.  In  1846  their  deposits  were  3if  millions.  In  1861  they 
had  risen  to  41^  millions;  in  1867,  owing  to  the  competition  of  the  Post- 
Office  savings  banks,  which  paid  a  considerably  lower  rate  of  interest,  they 
had  fallen  to  36^-  millions.  Since  that  time  they  have  been  advancing,  not 
rapidly,  but  steadily.  In  1874  they  were  41^  millions;  in  1881  they  were 
£^44, 175,000,  showing  an  annual  increment  of  about  ,£350,000.  The  Post- 
Office  savings  banks,  as  the  committee  are  aware,  were  founded  in  1861. 
They  have  advanced  on  the  whole  very  steadily,  Even  the  most  unfavor- 
able state  of  circumstances  among  the  laboring  classes  has  never  done 
more  than  reduce,  not  inconsiderably,  but  still  not  vitally,  not  the  amount 
of  the  deposits,  but  the  yearly  increment  of  the  deposits.  The  ordinary 
increment  of  the  deposits  in  the  Post-Office  savings  banks  has  been  from 
^1,600,000  to  ;£i, 800,000.  In  the  first  decade  the  lowest  amount  for  any 
year  is  ;£i,  533,000,  and  the  highest  ,£1,926,000.    The  lowest  year  in  the 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.     I  73 

second  decade  was  1879,  when  there  was  great  distress  and  want  of  employ, 
ment ;  but  even  in  that  year  the  deposits  were  ^1,600,000.  In  the  highest 
of  the  prosperity  years,  1872,  the  savings  were  ,£2,293.000,  and  for  1 881-2, 
with  a  great  diminution  of  means  on  the  part  of  the  laboring  population, 
they  have  risen  to  ^3,189,000.  I  think  that  shows  that,  whatever  other 
effects  this  diminution  of  the  duty  on  spirits  is  producing,  it  is  clearly  as- 
sociated with  the  gradual  extension  of  more  saving  habits  among  the 
people." 

Another  point  of  interest  established  by  the  records  of  re- 
cent experience  is  a  very  remarkable  increase  in  the  production 
and  consumption  of  malt  liquors  in  the  United  States.  In  1863 
the  estimated  production  of  all  malt  liquors  was  estimated  at 
about  2,000,000  barrels  of  31  gallons  each,  or  60,000,000  gallons. 
In  1880  the  production  actually  assessed  for  revenue  by  the 
Federal  Government  was  13,347,110  barrels;  1881,  14,311,028; 
and  in  1883,  17,757,892,  or  550,494,000  gallons,  reckoning  31  gal- 
lons to  the  barrel.  The  increase  of  beer  production  and  con- 
sumption in  the  United  States  since  1863  has  been,  therefore, 
in  a  far  greater  proportion  than  the  increase  in  population. 
How  far  it  has  served  to  diminish  the  vice  of  drunkenness  in  its 
most  vicious  form  by  supplanting  the  consumption  of  the 
stronger  spirituous  liquors  for  the  purposes  of  drink  and 
stimulants  has  not  yet  been  shown  by  any  statistics,  and  it  may 
be  difficult  to  do  so  with  any  high  degree  of  accuracy;  but  such 
a  supposition  is,  to  say  the  least,  extremely  probable,  and  is 
claimed  by  the  representative  brewers  of  the  United  States  to 
be  almost  in  the  nature  of  a  self-evident  fact.  The  President  of 
the  American  Brewers'  Association,  in  his  address  before  the 
annual  meeting  in  1883,  commented  upon  it  as  follows: 

"  A  more  remarkable  revolution  in  the  habits  and  customs  of  a  people, 
nor  a  longer  stride  in  the  path  of  temperance  by  the  substitution  of  a 
healthful  and  invigorating  drink,  nutritive  and  but  slightly  stimulant,  for 
the  fiery  spirits  whose  consumption  is  so  apt  to  lead  to  excess,  is  not  to  be 
found  in  the  history  of  the  world." 

Attention  should  here  also  be  called  to  a  most  significant  and 
notable  circumstance  in  connection  with  this  matter  ;  and  that  is 
that  while  the  number  of  persons  who  take  out  licenses  under  the 
internal  revenue  to  retail  liquors  in  the  different  States  and  Ter- 


*74      •  PRACTICAL    ECONOMICS. 

ritories  is  continually  increasing — 163,523  in  1879-80;  170,640  in 
1880-81  ;  168,770  in  1881-82;  and  187,871  in  1883 — the  number 
of  those  who  take  out  similar  liquor  licenses  in  those  States  where 
prohibition  has  been  engrafted  on  the  constitution  or  placed 
upon  the  statute-book  appears  to  increase  in  an  equal  or  greater 
proportion.  Thus,  in  the  State  of  Maine  the  number  of  such 
licenses  in  1880  was  757;  in  1881,820;  in  1882,918;  and  in 
1883,  1054.  In  Kansas  there  were  11 32  in  1881  ;  1460  in  1882; 
and  1898  in  1883.  In  New  Hampshire  there  were  747  in  1880 
and  1066  in  1883.  Iowa,  3965  in  1880;  4104  in  1882;  and  5001 
in  1883.  Vermont,  on  the  other  hand,  shows  a  decrease  from 
508  in  1880  to  454  in  1883.  As  illicit  dealing  in  malt  liquors,  by 
reason  of  their  bulkiness,  is  more  difficult  than  in  the  case  of 
spirits,  it  would  seem  as  if  one  effect  of  prohibition  of  all  retail 
sales  of  all  liquors  must  be  to  discriminate  against  beer  and  in 
favor  of  whiskey  drinking ;  but  record  of  licenses  for  the  sale  of 
malt  liquors  in  the  prohibition  States  does  not  show  a  decrease, 
but  rather  a  marked  increase,  in  the  number  granted. 

The  aggregate  exportation  of  American  beer,  altho  increasing, 
is  as  yet  very  insignificant  in  comparison  with  the  domestic  pro- 
duction ;  the  export  in  1883  having  been  220,792  gallons  in 
casks  and  215,938  dozen  bottles,  as  compared  with  61,661  gal- 
lons in  casks  and  3633  dozen  bottles  in  1875.  Most  of  the  beer 
exported  finds  its  market  in  Mexico,  Central  America,  the  West 
Indies,  Colombia,  Venezuela,  Brazil,  Japan,  and  the  Sandwich 
Islands. 

The  statistics  of  the  Dominion  of  Canada  indicate  a  com- 
parative consumption  of  distilled  spirits  largely  in  excess  of  that 
in  the  United  States,  approximating  two  gallons  per  capita ;  a 
conclusion  which  perhaps  ought  not  to  be  regarded  as  surprising, 
when  consideration  is  given  to  the  proportion  of  the  population 
of  the  Dominion  engaged  in  a  rigorous  climate  in  rough,  out- 
of-door  employments,  as  fishing  and  lumbering,  in  which  the 
consumption  of  spirits  is  regarded  almost  in  the  light  of  a 
necessity. 

Recently  published  French  statistics  indicate  a  marked  in- 
crease in  the  consumption  of  alcoholic  liquors  in  France  within  the 
last  fifty  years,  and  that  the  present  annual  rate  is  about  three 


OUR  EXPERIENCE   IN    TAXING  DISTILLED   SPIRITS.     1 75 

fourths  of  a  gallon  (3  litres  =3.15  quarts')  per  capita.  The 
present  annual  per-capita  consumption  of  wine  in  France  is  es- 
timated at  about  30  gallons  (120  litres).  The  departments  of 
France  which  consume  the  most  spirituous  liquors  are  those 
which  produce  no  wines ;  and  in  the  departments  where  wine 
is  largely  produced  cases  of  "  delirium  tremens"  are  acknowl- 
edged to  be  rare. 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS.1 

II. 

WITH  a  view  of  making  as  complete  as  possible  the  curi- 
ous record  of  the  experience  of  the  United  States  in 
taxing  distilled  spirits,  especially  in  that  department  of  the  sub- 
ject which  relates  to  the  influence  of  this  tax  on  other  industries, 
it  is  proposed  to  here  turn  back  and  ask  attention  to  an  example 
of  no  little  economic  interest  and  importance  which  inadvert- 
ently was  not  noticed  in  its  proper  connection  in  the  preceding 
article,  and  which  illustrates  in  a  remarkable  manner  the  subtle, 
diffusive,  and  often  remote  and  unexpected  influence  of  a  tax, 
especially  when  the  same  is  imposed  on  the  processes  rather 
than  the  final  results  of  industry. 

Before  the  tax  was  levied  upon  distilled  spirits  in  1862,  a 
large  (and  probably  the  largest)  proportion  of  the  vinegar  used 
in  the  United  States  was  made  from  this  product,  rather  than, 
as  was  popularly  supposed,  from  the  juice  of  apples  and  grapes ; 
the  process  of  manufacture  being  substantially  to  add  yeast  to 
alcohol  (low  proof-spirits)  largely  diluted  with  water,  and  allow 
the  mixture  to  trickle  slowly  through  a  cask  filled  with  shavings 
of  beech-wood.  In  this  way  the  alcoholic  liquor  is  caused  to 
present  an  immensely  extended  surface  to  the  action  of  the  air, 
when  oxidation  takes  place  so  rapidly  that  very  frequently  by 
the  time  the  liquor  has  reached  the  bottom  of  the  cask  it  no 
longer  contains  any  alcohol,  but  is  entirely  converted  into  vine- 
gar. Experience  has  also  shown  that  vinegar  thus  manufactured 
and  with  care  is  always  purer  and  a  better  preservative  of  ani- 
mal and  vegetable  food  than  vinegar  manufactured  from  the 
juices  of  fruits,  inasmuch  as  the  latter  always  contain  putresci- 

1  Princeton  Review, 
176 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   STIR  ITS.    \fj 

ble  constituents  which  are  rarely  fully  eliminated  by  the  pro- 
cess of  fermentation  ;  and  further,  that  when  the  use  of  distilled 
spirits  at  their  first  cost  of  production  is  permissible  for  the 
preparation  of  vinegar,  the  product  can  be  sold  at  a  much 
cheaper  rate  than  any  other  competing  article :  and  the  desira- 
bility of  cheapness  and  purity  in  the  supply  of  this  commodity 
at  once  becomes  evident,  when  it  is  remembered  that  the  largest 
consumption  of  vinegar  in  every  community  is  for  the  pickling 
(preservation)  of  meats,  fish,  and  vegetables.  All  this  business 
the  war-taxation  at  once  and  almost  completely  broke  up.  On 
the  other  hand,  the  manufacture  of  cider — which  was  not 
specially  taxed — received  a  great  stimulus.  New  orchards  were 
set  out,  new  nurseries  were  called  into  existence,  additional 
cider-mills  were  demanded  in  every  apple-section  of  the  country, 
and  thousands  of  dollars  were  invested  in  this  industry  where 
but  a  small  sum  had  formerly  sufficed.  The  old  fashioned  press 
also  gave  place  to  improved  and  expensive  machinery,  and  ex- 
pensive buildings  were  erected  for  conducting  the  business  on  a 
most  extensive  scale.  According  to  a  statement  submitted  to 
Congress  in  1882  by  the  "  Cider-Vinegar  Makers'  Association," 
the  number  of  persons  engaged  in  cider  and  cider-vinegar 
making  in  the  United  States  at  that  time  was  between  ten 
and  twelve  thousand,  and  the  amount  of  capital  invested  as 
aggregating  into  millions.  As  the  amount  of  available  cider 
and  wine  produced  in  the  most  favorable  fruit-years  is,  however, 
never  sufficient  to  supply  the  demand  of  the  country  for  vinegar, 
other  and  cheaper  materials  for  its  manufacture  were  sought  for 
and  found,  but  always  at  the  sacrifice  of  the  purity  and  health- 
fulness  of  the  resulting  product.  Great  hopes  were  for  a  time 
entertained  that  a  fermented  syrup  made  from  glucose,  or 
starch-sugar,  would  answer,  and  this  material  soon  came  into 
extensive  use ;  but  the  vinegar  made  from  it  was  found  to 
soon  putrefy,  and  its  use,  after  occasioning  great  losses  to  pick- 
lers  and  the  community,  was  abandoned.  Unscrupulous  manu- 
facturers also  made  use  of  mineral  acids  for  the  manufacture  of 
factitious  vinegar ;  and  as  some  evidence  of  the  extent  to  which 
such  fabrications  came  into  general  use,  it  may  be  stated  that 
in  1877  the  Board  of  Health  of  the  District  of  Columbia  con- 
demned five  car-loads  of  so-called  vinegar  sent  to  Washington 


I78  PRACTICAL  ECONOMICS. 

from  Chicago,  analysis  showing  that  the  same  was  little  other 
than  dilute  sulphuric  acid  ;  the  board  further  reporting  that  the 
sample  analyzed  formed  part  of  an  invoice  of  a  thousand  barrels 
which  had  been  brought  to  that  city  for  sale  and  consumption 
as  vinegar. 

Under  such  circumstances,  Congress  in  1879  made  it  lawful 
for  manufacturers  of  vinegar  to  separate  by  a  so-called  vaporiz- 
ing process  the  alcoholic  element  of  an  ordinary  distiller's 
"  mash,"  and  condense  the  same  in  water  in  such  a  way  as  to 
form  a  weak  mixture,  suitable  for  making  vinegar,  and  yet  not 
salable  as  spirits.  But  the  moment  this  was  done,  fresh  indus- 
trial antagonisms  arose.  Vinegar  manufactured  from  distilled 
spirits  again  made  its  appearance  on  the  market,  and  in  such 
quantities  and  at  such  prices  that  the  cider-vinegar  makers 
claimed  it  would  be  no  longer  possible  for  them  to  continue 
their  business.  The  latter  accordingly,  as  was  to  have  been  ex- 
pected, speedily  organized  themselves  into  a  National  Protective 
Cider-Makers'  Association,  and  demanded  of  Congress,  through 
petitions  and  deputations,  that  the  permission  granted  to  vapor- 
ize alcohol  and  use  it  in  the  manner  described  for  the  manu- 
facture of  vinegar  should  be  at  once  repealed,  alleging  that 
the  consequence  of  refusal  would  be  to  destroy  many  millions 
of  dollars  of  capital  which  the  original  tax-law  had  caused 
to  be  invested,  and  (with  less  of  truth)  that  the  fruit-pro- 
duction of  the  country  would  be  checked,  and  the  manufac- 
ture and  sale  of  deleterious  compounds  to  serve  as  vinegar  be 
encouraged.  Very  curiously,  also,  the  distillers  actively  co-ope- 
rated as  allies  of  the  cider-vinegar  makers  in  asking  for  a  repeal 
of  the  new  law,  alleging  a  fear  that  it  would  encourage  illicit 
distillation  and  consequent  frauds  on  the  revenue.  That  there 
were  some  reasons  for  such  apprehensions  could  not  well  be 
doubted ;  but  the  real  motive  influencing  the  distillers  un- 
doubtedly was,  the  fear  of  losing  a  limited  market  for  their 
products  which  had  come  to  them  through  a  revival  to  some 
extent  of  the  manufacture  of  spirit-vinegar,  in  consequence  of 
the  reduction  of  the  tax  on  proof-spirits  in  1868  from  $2  per 
proof-gallon  to  50  cents,  with  subsequent  changes  to  70  and  90 
cents  in  1872  and  1875  respectively.  And  the  antagonisms  thus 
inaugurated  still  exist,  and   continue   to   occupy  the   attention 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     1 79 

of  the  committees  of  Congress  in  a  greater  or  less  degree  at 
almost  every  session  ;  the  whole  history  affording  a  most  strik- 
ing illustration  of  the  unnatural,  unpatriotic,  and  false  view  that 
has  come  to  be  almost  universally  taken  under  the  leading  free 
representative  government  of  the  earth  of  the  great  function  of 
taxation.  The  distiller,  for  example,  in  the  case  in  question, 
asking  to  have  returned  to  him  what  he  regards  as  an  alienated 
right,  namely,  to  levy  contribution  on  every  one  who  desires  to 
use  alcohol  in  any  shape ;  the  cider-maker,  that  the  tax  may  be 
so  fixed  as  will  prevent  competition  and  thereby  enable  him  to 
exact  a  larger  profit  on  the  sale  of  his  product ;  and,  finally,  the 
spirit-vinegar  maker  claiming  that  as  he  alone  occupies  a  humani- 
tarian standpoint,  because  his  product  alone  is  cheap  and  always 
healthful,  therefore  that  the  law  should  be  especially  framed  to 
promote  and  encourage  his  business ; — each  and  all  speaking,  as 
is  proper,  for  their  own  interests  ;  each  and  all,  as  is  not  proper, 
ever  ready  to  promote  their  interests  by  fictitious  pleas  and 
averments ;  while  no  one  (or  but  rarely)  appears  on  behalf  of 
the  consumers,  who  are  the  great  mass  of  the  people,  in  whose 
interests,  it  is  popularly  claimed,  all  laws  are  enacted.  Further- 
more, none  of  the  disastrous  consequences  which  it  was  confi- 
dently predicted  would  ensue  if  Congress  failed  to  withdraw  from 
the  spirit-vinegar  makers  the  permission  to  use  vaporized  spirits 
have  apparently  occurred  as  the  result  of  such  failure.  The  regu- 
lar business  of  producing  distilled  spirits  goes  on  as  usual. 
Farmers  have  not  ceased  to  plant  and  care  for  their  orchards ; 
cider  continues  to  be  manufactured  in  increasing  quantities 
when  the  seasons  are  propitious;  while  the  general  public  have 
abundant  opportunities  to  supply  themselves  with  whatever 
vinegar  they  may  desire  at  lower  prices  than  have  prevailed 
since  the  breaking  out  of  the  war  in  i860.  The  Commissioner 
of  Internal  Revenue  alone  seems  warranted  in  complaining  that 
through  the  use  of  the  vaporizing  process  the  facilities  for  illicit 
distillation  are  increased,  and  probably  taken  advantage  of,  to  a 
considerable  extent.  Finally,  if  to  any  it  may  seem  that  this 
history  has  been  stated  in  greater  detail  than  is  expedient, 
it  may  be  replied  that  no  more  important  contributions  can,  in 
the  opinion  of  the  writer,  be  made  to  economic  science  than 
just   such   records   of   practical   experience;    for   it   is   mainly 


I  So  PRACTICAL  ECONOMICS. 

through  the  force  and  teaching  of  such  examples  that  the 
masses  can  be  induced  to  acknowledge  the  truth  and  make  the 
application  of  abstract  principles. 

One  of  the  topics  to  which  the  attention  of  the  Revenue 
Commission  of  1865  was  given,  was  the  influence  of  the  greatly 
increased  cost  of  distilled  spirits  in  the  United  States,  through 
the  war-taxation,  on  their  demand  for  drinking  purposes ;  and 
the  testimony  of  a  large  number  of  persons  from  all  sections  of 
the  loyal  States — manufacturers  and  dealers  in  liquors,  United 
States  revenue  officials  and  others — was  taken  in  reference  to 
this  matter.  The  opinions  expressed  were  almost  unanimously 
to  the  effect  that  no  change  in  consumption  was  noted  by  re- 
tailers until  after  the  tax  was  raised  above  60  cents  per  gal- 
lon ;  but  that  when  the  tax  was  increased  to  $2  the  reduction 
for  a  time  in  consumption,  especially  in  the  thinly  settled  sec- 
tions of  the  country,  was  very  noticeable.  With  the  increase  of 
taxes  on  whiskey  there  was  also  an  immediate  and  very  marked 
increase  in  the  consumption  of  beer,  the  price  of  which  was  not 
enhanced  by  taxation  to  a  corresponding  extent  with  that  of 
spirits.  Thus  in  1864,  with  an  internal-revenue  tax  of  $1  per 
barrel,  the  assessment  was  paid  on  an  equivalent  of  2,223,000 
barrels;  in  1865  on  3,657,000;  in  1866  on  5,115,000;  in  1867  on 
3,819,000;  while  in  1883  the  number,  as  before  stated,  was  17,- 
757,892  barrels. 

On  the  other  hand,  the  testimony  of  leading  retail  and  pack- 
age dealers  in  liquors  in  many  of  the  large  towns  and  cities  was 
generally  to  the  effect  that  their  business  in  the  aggregate  was 
not  diminished  by  the  high  rates  of  taxes  imposed  on  spirits ; 
but  at  the  same  time  all  admitted  that  the  demand  for  the  so- 
called  "  foreign"  or  "  imported '.  liquors  (upon  which  the  tariff 
rates  had  been  raised  to  a  greater  extent  than  the  taxes  on  do- 
mestic spirits)  largely  diminished ;  and  also  that  this  loss  was 
fully  made  good  by  an  increased  sale  of  American  whiskey.  In 
fact,  the  great  increase  at  this  time  in  the  price  of  foreign  liquors 
greatly  promoted  the  sale  and  use  of  whiskey  in  the  northern 
and  eastern  sections  of  the  country,  and  seems  to  have  nation- 
alized this  liquor  as  a  beverage,  and  also  the  term  "  Bourbon," 
which  then  for  the  first  time  was,  in  common  parlance  (as  it  ever 
since  has  been),  generally  given  to  every  variety  of  American 


OUR  EXPERIENCE  IN    TAXING  DISTILLED   SPIRITS.     l8l 

whiskey.  One  prominent  retail  liquor-dealer  of  New  York  tes- 
tified before  the  Commission  in  1865  that  where  during  the  pre- 
ceding two  years  he  had  lost  a  sale  of  four  gallons  of  "  for- 
eign" (?)  brandy,  he  had  in  the  same  time  gained  a  sale  of 
twelve  gallons  of  American  whiskey.  There  was  also  a  general 
agreement  among  the  witnesses  that  one  noticeable  effect  of  the 
greatly  increased  cost  of  spirits  through  taxation  was  an  in- 
crease of  adulteration  of  the  cheap  liquors  that  were  retailed, 
thus  debasing  the  quality  of  the  article  that  was  consumed  by 
the  habitually  intemperate  or  the  physically  exhausted  among 
the  poor.  One  practical  illustration  in  proof  of  this  (contained 
in  a  memorial  presented  to  Congress  by  the  American  Wine  and 
Spirit  Society)  was,  that  in  i860,  when  gin  was  selling,  duty  paid, 
in  New  York,  at  65  cents  per  gallon,  the  retailer  charged  6 
cents  a  glass;  and  that  the  retail  price  continued  the  same  when 
the  wholesale  price  had  subsequently  advanced  to  $3.25  per 
gallon. 

Previous  to  the  war  and  the  taxes,  the  cheap  liquors  bought 
by  the  masses  in  the  United  States  for  stimulant  or  intoxication 
were  not  much  adulterated,  because  there  was  nothing  much 
cheaper  than  the  crude  proof-spirit  itself  (costing  from  14  to  23 
cents  per  gallon  wholesale)  which  could  be  used  as  a  material  for 
adulteration.  At  the  same  time,  nothing  could  be  much  more 
deleterious  than  the  American  raw  spirits  (whiskeys)  from  which 
the  so-called  fusel-oil  (amylic  alcohol),  which  is  the  invariable 
accompaniment  of  its  distillation,  has  not  been  removed  by  re- 
distillation or  by  oxidation  through  standing  and  atmospheric 
exposure.1 

Some  reliable  testimony  was  also  taken  illustrative  of  the 
specific  consumption  of  distilled  spirits  in  the  United  States  be- 
fore the  war.  Thus,  according  to  the  opinion  of  those  best 
conversant  with  the  trade,  the  quantity  of  proof  spirits  re- 
quired to  meet  the  demands  of  New  York  City  and  its  immedi- 

1  While  fusel-oil,  in  itself,  is  so  deleterious  that  the  inhalation  of  its  vapor, 
even  in  minute  quantity,  is  very  dangerous,  there  can  be  no  doubt  that  it  is 
almost  completely  removed  from  spirits  through  what  is  technically  called  "age- 
ing," or  atmospheric  oxidation  and  moderately  high  temperatures.  Under  such 
circumstances  the  fusel-oil  appears  to  be  naturally  converted  into  innoxious  eth- 
ers, which  give  to  wines  and  liquors  their  delicate  "bouquet,"  or  flavor,  which  is 
so  much  prized  and  is  so  agreeable. 


1 82  PRACTICAL   ECONOMICS. 

ate  vicinity  in  1862  was  from  800  to  1000  barrels  daily,  or  from 
twelve  to  fifteen  millions  of  gallons  per  annum.  Of  this  amount 
one  half  was  set  down  as  directly  consumed  for  drink ;  while  the 
balance,  having  been  converted  into  alcohol,  pure  spirits,  imita- 
tion liquors,  medicinal  preparations  and  the  like,  found  a  market 
elsewhere.  According  to  the  testimony  of  the  then  Superinten- 
dent of  Police,  the  number  of  places  where  spirituous  liquors 
were  sold  at  retail  in  New  York  City  in  1862  was  upwards  of 
8000;  and  that  the  quantity  sold  over  the  bars  of  some  of 
the  largest  hotels,  restaurants,  and  drinking-saloons  was  equiva- 
lent in  each  case  to  a  barrel  of  fifty  gallons  daily. 

The  results  of  investigations  made  some  years  ago  in  Eng- 
land, and  communicated  in  a  paper  read  before  the  Statistical 
Society  by  the  Rev.  Dawson  Burns  in  1875,1  were  to  the  effect, 
that  increased  taxation  upon  spirits  in  Great  Britain,  and  a  conse- 
quent increase  in  their  price,  had  always  resulted  in  restricted 
consumption ;  that  the  lowering  of  the  rate  had,  on  the  other 
hand,  stimulated  consumption  ;  and  that  seasons  of  manufactur- 
ing and  commercial  prosperity  and  development  virtually  oper- 
ated as  a  reduction  of  the  rate  and  of  the  price.  Mr.  Burns,  in 
the  paper  referred  to,  also  brings  out  this  further  interesting 
fact ;  namely,  that  in  1861  Mr.  Gladstone,  with  a  view  of  induc- 
ing a  popular  consumption  of  light  wines,  and  in  accordance 
with  the  popular  theory  that  light  wines,  if  cheap,  would  readily 
enter  into  consumption,  and  by  helping  to  drive  out  the  stronger 
liquors  would  assist  in  the  work  of  promoting  popular  sobriety, 
largely  reduced  the  duties  on  imported  wines,  i.e.,  from  5s.  o^d. 
to  is.  per  gallon  on  wines  containing  less  than  26  per  cent  of 
proof-spirits,  and  50  per  cent  on  wines  more  highly  alcoholic 
but  not  exceeding  42  per  cent  of  proof-spirits.  The  result 
was  a  refutation,  in  a  degree,  of  the  popular  theory.  The 
importation  and  use  of  imported  wines,  as  was  expected,  largely 
increased ;  and  altho  a  taste  for  the  French  clarets  was  par- 
tially excited  among  the  British  public,  the  consumption  of  the 
stronger  wines  of   Spain   and  Portugal — the   sherries   and  the 

1  "  The  Consumption  of  Intoxicating  Liquors  at  various  periods  as  affected 
by  the  rates  of  duty  imposed  upon  them,"  by  the  Rev.  Dawson  Burns,  M.A., 
Metropolitan  Superintendent  of  the  United  Kingdom  Alliance.  {Journal  of  the 
Statistical  Society  of  London,  vol.  xxxviii.  1875.) 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     1 83 

ports — was  stimulated  in  a  much  greater  degree.  In  the  de- 
bate, however,  which  followed  the  reading  of  this  paper,  the 
drift  of  opinion  expressed  was,  that  the  conclusion  of  Mr. 
Burns,  that  high  duties  as  a  rule  reduced  the  consumption  of 
spirits  in  England,  was  not  sustained ;  and  it  was  pointed  out 
by  Dr.  Farr  and  others  that  the  consumption  of  intoxicating 
liquors  in  Great  Britain  was  affected  far  more  by  the  prosperity 
of  the  country  and  the  rates  of  wages  than  by  the  duties  which 
had  at  different  times  been  imposed  upon  them.  And  the  late 
Mr.  Dudley  Baxter,  especially,  whose  knowledge  and  judgment 
of  economic  matters  are  entitled  to  great  respect,  maintained 
that,  as  regards  the  upper  and  middle  classes  of  Great  Britain, 
Mr.  Gladstone's  legislation  in  respect  to  wines  had  been  of  most 
decided  advantage  to  the  cause  of  temperance ;  and  that  this, 
together  with  the  spread  and  cheapening,  by  his  measures,  of 
tea  and  coffee,  had  been  one  of  the  most  effectual  agencies  that 
had  been  adopted  in  the  country  for  many  years  for  the  further- 
ance of  the  object  which  the  advocates  of  temperance  had  at 
heart.  But  be  this  as  it  may,  the  whole  evidence  from  the  ex- 
perience of  the  United  States  is,  that  if  the  great  and  rapid  in- 
crease in  the  price  of  distilled  spirits,  after  the  year  1863,  through 
Federal  taxation,  did  for  a  time  and  to  some  extent  operate  to 
diminish  their  popular  consumption,  the  effect  was  but  tempo- 
rary. And  such  a  result,  when  the  habits  and  character  of  the 
people  of  the  United  States  are  taken  into  consideration, 
ought  not  to  have  been  unexpected  ;  and  it  is  to  be  observed, 
furthermore,  that  it  accords  entirely  with  the  experience  of 
Great  Britain,  as  accepted  by  her  leading  economists  and  ex- 
pressed in  the  debate  above  noticed.  For  such  is  the  degree  of 
material  abundance  in  the  United  States,  and  so  easy  has  it  been 
for  the  masses  of  its  people  to  obtain  what  they  want  in  the 
nature  of  food-supplies,  that  they  are  notoriously  extravagant 
and  not  given  to  economy  in  the  use  of  all  such  materials ;  * 

1  The  following  example  in  the  way  of  confirmatory  evidence  on  this  point, 
which  has  come  to  the  knowledge  of  the  writer  while  the  present  article  was  in 
the  course  of  preparation,  is  so  interesting  that  he  cannot  forbear  submitting  it 
to  the  reader. 

During  the  past  year,  the  price  of  sugars,  all  over  the  world,  owing  to  an  in- 
crease of  production  has  been  lower  than  at  any  previous  time  in  the  history  of 
commerce;  and,  in  accordance  with  a  well-recognized  economic  law  or  axiom, 


1 84  PRACTICAL  ECONOMICS. 

and  a  rise  of  price  operates  less  in  restricting  consumption  than 
in  almost  any  other  country.  And  as  illustrative  of  this  matter, 
it  is  interesting  to  note  the  difference  in  the  methods  by  which 
liquors  are  retailed  in  the  United  States  and  England  respec- 
tively. Thus  in  the  former,  when  a  drink  of  distilled  spirits  is 
called  for  at  a  public  bar,  the  bottle  or  decanter  is  set  before  the 
customer  and  he  helps  himself ;  in  the  latter,  on  the  contrary, 
every  quantity  of  spirits  retailed  is  measured  by  the  seller,  and 
accurately  proportioned  to  the  price  to  be  received  by  him.  This 
custom  prevails  universally  in  Great  Britain — in  the  leading  hotels 
and  club-houses  as  well  as  with  the  smallest  and  lowest  retailers  ; 
and  hence  the  original  signification  of  the  term  "  dram-shop,"  i.e., 
a  place  where  liquor  is  sold  by  the  fluid  drachm  or  other  measure, 
but  which  in  the  United  States  has  become  so  perverted  in 
meaning  as  to  now  signify  a  place  where  one  can  drink  without 
any  exact  measure,  or  have  as  much  strong  liquor  for  a  common 
price  as  the  average  consumer  would  ordinarily  desire  for  one 
act  of  drinking.  Besides,  as  remarked  by  Mr.  Burns  in  his  paper 
above  referred  to,  industrial  prosperity  and  full  employment  of 
the  masses  virtually  operate  as  a  reduction  of  the  tax  and  the 
price  of  spirits ;  and  such  employment  and  industrial  activity 
existed  in  the  United  States  in  a  high  degree  from  the  latter 
years  of  the  war  down  to  the  era  of  business  and  financial  dis- 

consumption  has  also  noticeably  increased.  In  the  United  States  this  increase  is 
estimated  as  high  as  from  10  to  15  per  cent;  and,  very  curiously,  has  manifested 
itself  in  a  greater  proportionate  demand  for  the  lower  grades  of  refined  white 
sugars,  rather  than,  as  might  naturally  have  been  expected,  for  the  best  qualities  of 
refined  yellow  sugars,  which  are  cheaper.  This  circumstance  attracting  the  at- 
tention of  one  of  the  great  refiners  in  the  United  States,  he  sought  an  explana- 
tion of  it  from  one  of  his  most  intelligent  workmen,  and  in  answer  received  the 
following  reply:  "  There  is  no  difficulty,  sir,  in  explaining  it.  I  give  my  wife, 
for  instance,  every  Monday  morning  fifty  cents  to  buy  sugar  for  the  family  for  a 
week,  as  I  have  always  done;  and  she  buys  the  same  quantity  as  before:  but 
the  same  money  now  gives  us  the  same  quantity  of  white  sugar  that  it  once  did 
of  the  yellow."  Or  in  other  words,  the  wife,  being  the  judge  of  the  interests  and 
desires  of  the  family,  preferred  to  take  her  share  of  the  advantage  resulting  from 
the  fall  in  the  price  of  this  essential  article  of  household  consumption  in  an  in- 
crease in  quality  (which,  by  the  way,  was  more  apparent  to  the  eye  than  the  taste), 
rather  than  in  the  form  of  a  larger  quantity,  for  the  same  price,  of  the  grade  which 
had  before  been  satisfactory;  or  than  the  same  quantity  and  quality  as  before,  and 
applied  the  resulting  saving  to  the  purchase  of  something  additional  or  to  an 
increase  of  the  family  reserve  in  the  savings-bank. 


OUR  EXPERIENCE   IX    TAXING  DISTILLED   SPIRITS.     1 85 

turbance  and  paralysis  in  1873.  During  all  this  period,  accord- 
ingly, the  aggregate  drinking  consumption  of  distilled  and  fer- 
mented liquors  in  the  United  States  went  on  steadily  increasing, 
or  at  least  keeping  pace  with  the  increase  of  population.  With 
the  advent  of  bad  times  in  this  latter  year,  some  diminution  in 
the  popular  use  of  these  commodities  might  naturally  have 
been  expected;  and  during  the  years  1873  and  '74  there  seems 
to  have  been  some  decrease,  or  at  least  no  increase  ;  the  decrease 
manifesting  itself  rather  in  the  consumption  of  fermented  liquors 
than  of  distilled  spirits :  the  receipts  of  internal  revenue  from 
the  former,  from  the  tax  of  $1  per  barrel,  declining  from  $8,910,- 
823  in  1873  to  $8,880,829  in  1874,  and  $8,743,744  in  1876;  while 
the  population  continued  to  increase.  But  subsequent  to  1875-6, 
and  especially  on  the  recurrence  of  national  prosperity  in  1878-9, 
the  aggregate  consumption  of  spirits  and  beer  in  the  United 
States  rapidly  increased ;  the  internal-revenue  receipts  from  dis- 
tilled spirits — tax  remaining  the  same — increasing  from  $56,- 
426,000  in  1875-6  to  $69,893,000  in  1882-3;  and  of  fermented 
liquors  from  $9,571,000  in  1875-6  to  $16,153,920  in  1882-3: 
which  increments,  it  will  be  noted,  are  in  much  greater  ratio 
than  any  concurrent  increase  in  population. 

It  is  interesting  to  here  also  note  the  changes  which  have 
taken  place  during  the  period  under  consideration  in  the  impor- 
tation of  champagne,  a  form  of  spirituous  liquor  almost  exclu- 
sively consumed  by  the  more  wealthy  portion  of  our  population. 
In  1870  the  importation  was  returned  at  2,106,000  quarts  and 
906,788  pints.  In  1874,  the  year  following  the  commencement 
of  the  long  commercial  and  industrial  depression,  the  importa- 
tion was  1,615,000  quarts,  a  decrease  of  491,000;  and  1,688,000 
pints,  an  increase  of  782,000.  In  1878  the  importation  was 
837,000  quarts,  a  decrease,  as  compared  with  1874,  of  778,000; 
and  1,185,000  pints,  a  decrease  of  500,000.  In  1880,  national 
prosperity  having  returned,  the  importation  was  1,35 1,000  quarts, 
an  increase,  as  compared  with  1878,  of  514,000;  and  1,784,000 
pints,  an  increase  of  599,000.  For  the  fiscal  year  1883  the  im- 
portations of  champagnes  were  returned  at  2,506,092  quarts  and 
3,927,372  pints  or  less ;  a  very  large  increase  over  the  importa- 
tions of  any  former  years. 

Finally,  considering  all  the  evidence  available  on  this  matter 


1 86  PRACTICAL  ECONOMICS. 

of  the  production  and  consumption  of  distilled  and  fermented 
liquors  in  the  United  States  and  other  countries,  one  cannot 
resist  the  impression  of  the  small  apparent  effect  which  specific 
agencies — legislative,  societary,  and  personal — produce  in  restrict 
ing  their  consumption  as  stimulants  or  for  intoxicating  purposes. 
Excepting,  possibly,  the  recent  experience  of  Great  Britain  and 
certain  exceptional  periods,  the  aggregate  everywhere  goes  on 
increasing :  no  matter  whether  the  prices  be  high  or  low,  in  bad 
times  as  well  as  in  good :  in  the  latter  because  the  masses  have 
the  means  to  indulge  their  appetites,  and  in  the  former  because 
they  think  there  is  a  need  of  stimulants  to  counteract  the  ten- 
dency of  the  times  to  mental  depression.  The  most  remarkable 
illustration  to  the  contrary  is  probably  to  be  found  in  the  results 
of  the  labors  of  Father  Mathew  in  behalf  of  temperance  in  Ire- 
land in  the  years  1838-40.  Under  his  influence,  the  consump- 
tion of  distilled  spirits  in  Ireland,  as  indicated  by  the  revenue 
returns,  fell  off  more  than  40  per  cent,  and  did  not  materially 
increase  for  many  years  thereafter.  Now,  however,  theper  capita 
consumption  of  Ireland,  with  a  greatly  reduced  population,  is 
about  the  same  as  it  was  prior  to  the  temperance  agitation  in 
1838  ;  thus'  indicating  that  the  influence  of  Father  Mathew,  tho 
resulting  in  great  immediate  good,  has  not  been  permanent.  It 
is  also  to  be  noted  that  the  reduction  in  the  consumption  of 
distilled  spirits  in  Ireland  which  followed  Father  Mathew's 
work  was  accompanied  by  a  notably  increased  consumption  of 
tea  and  malt  liquors.  On  the  other  hand,  and  as  matter  of 
encouragement  to  any  friends  of  temperance  who  may  feel  a 
sense  of  discouragement  at  the  results  of  these  investiga- 
tions, the  fact  before  noticed  should  be  recalled,  that  while 
the  production  and  consumption  of  distilled  spirits  in  the 
United  States  continually  increase  and  appear  very  large  in 
the  aggregate,  the  comparative  consumption  is  undoubtedly 
much  less  than  it  was  forty  years  ago, — unquestionably  very 
much  less  than  it  was  at  the  commencement  of  the  present 
century, — and  does  not  at  present  tend  to  increase,  but  rather 
to  decrease ;  and  that  what  is  true  of  the  United  States  appears 
to  be  also  true  of  Great  Britain.  All  available  evidence,  further- 
more, is  to  the  effect  that  with  the  increase  of  civilization,  of 
facilities  for  intercommunication,  and  general  consuming  power, 
7 


OUR  EXPERIENCE  IN   TAXING  DISTILLED  SPIRITS.     1 87 

the  increased  consumption  of  distilled  spirits — taking  a  term  of 
years  for  comparison — has  not  been  by  any  means  as  great  as 
has  happened  in  respect  to  other  commodities  of  common  con- 
sumption. Thus,  while,  according  to  Mr.  Leone  Levi,  the  Brit- 
ish economist,  the  consumption  per  head  of  the  British  people 
from  1866  to  1877  of  bacon  and  hams  increased  277  per  cent, 
of  wheat  94  per  cent,  of  sugar  57  per  cent,  and  of  tea  32  per 
cent,  the  consumption  of  spirits  increased  only  21  per  cent.  A 
similar  conclusion  is  reached  by  comparing  the  estimated  per 
capita  consumption  of  certain  articles  of  daily  consumption  by 
the  population  of  the  city  of  London  in  1843  anc*  1865.  Thus, 
in  respect  to  sugar,  the  increase  during  this  period  was  from  16.5 
lbs.  to  41. 1  lbs. ;  of  tea,  from  1.4  lbs.  to  3.2  lbs. ;  of  cocoa,  from 
0.09  lb.  to  1.1  lbs. ;  and  of  spirits,  from  0.87  gallon  to  only  0.89 
gallon.  Evidence  to  the  same  effect,  even  more  striking  and 
confirmatory,  was  also  presented  by  Robert  Giffen,  Esq.,  Presi- 
dent of  the  Statistical  Society  of  London,  in  his  inaugural  ad- 
dress delivered  in  November,  1883  ;  from  which  appeared  that 
the  proportion  of  various  imported  and  excisable  commodi- 
ties retained  for  home  consumption  had  increased  per  head  of 
the  total  population  of  Great  Britain  during  the  period  from 
1840  to  1881  as  follows:  bacon  and  hams,  from  0.01  lb.  to 
13.93  lbs.;  butter,  1.05  to  6.36;  raw  sugar,  15.20  to  58.92;  rice, 
O.90  to  16.32 ;  tobacco,  0.86  to  1.41  :  while  the  per  capita  in- 
crease in  the  consumption  of  spirits  had  been  from  0.97  gallon 
to  only  1.08  gallons. 

The  statistics  of  German  consumption  are  also  reported  to 
lead  to  similar  conclusions. 

It  has  been  a  somewhat  popular  opinion  that  the  great  in- 
crease in  the  price  of  alcoholic  liquors,  through  taxation,  since 
1863  has  induced  and  increased  the  consumption  of  opium 
and  other  drugs  in  the  United  States,  as  substitutes  for  spirits. 
Of  this  there  is  no  positive  proof.  There  has  been  a  marked 
increase  in  the  importations  of  crude  opium  into  the  United 
States,  and  in  the  importation  and  domestic  manufacture  of 
morphia,  the  principal  derivative  of  opium,  since  i860,  but  not 
greater  than  what  would  seem  to  be  warranted  by  the  increase 
of  population.  In  i860  the  importations  of  crude  opium  were 
returned  at  119,525  lbs.,  and  in  1866  at  180,852  lbs.;  and  these 


1 88  PRACTICAL    ECONOMICS. 

facts  would  indicate  some  basis  for  the  belief  of  an  abnormal 
use  of  this  drug  during  the  years  of  the  war.  In  1869  the 
importation  fell  off  to  90,997  lbs.,  but  increased  in  1875  to 
188,238  lbs*,  in  1880  to  243,211  lbs.,  and  fell  off  in  1883  to 
229,012  lbs.  Supposing  the  entire  opium  importation  into 
the  United  States  for  the  past  year  (1883)  to  be  exclusively 
used  for  domestic  consumption,  certainly  this  amount  is  not 
large  for  53,000,000  people.  But  all  of  this  import  was  not 
so  used ;  inasmuch  as  there  is  some  export  of  opium  and  its 
derivatives  from  the  United  States  to  the  West  Indies  and 
Central  and  South  America;  in  all  which  countries  the  com- 
parative consumption  of  opium  is  much  greater,  and  the  com- 
parative consumption  of  spirits  much  less,  than  in  the  United 
States :  an  illustration  of  what  is  now  accepted  as  a  cosmic 
law,  that  the  use  of  intoxicating  liquors  is  to  a  certain  extent 
dependent  on  climate.  Medical  experts  have  very  generally 
come  to  regard  the  danger  in  respect  to  opium  consumption 
in  the  United  States  to  be  at  present  almost  wholly  confined 
to  the  use  of  morphia;  there  being  an  undoubted  tendency 
among  persons  affected  with  nervous  ailments, — more  especially 
women, — when  they  feel  depressed  from  various  causes,  and  in 
need  of  some  stimulant,  to  resort  to  this  drug,  which,  altho 
most  costly,  does  not  affect  the  breath  like  alcohol  and  can  be 
easily  carried  and  concealed  about  the  person. 

On  the  other  hand,  the  importation  of  opium  specially  prepared 
for  smoking  purposes,  which  did  not  exist  in  1865,  has  in  latter 
years  increased  enormously;  rising  from  12,554  lbs.  in  1871  to 
77,196  lbs.  in  1880,  and  298,153  lbs.  in  1883  ;  paying  in  the  latter 
year  a  customs  revenue  of  nearly  two  millions  of  dollars.  The 
preparation  of  opium  for  smoking  finds  its  way  into  the  country 
mainly  through  the  port  of  San  Francisco,  and  its  consumption 
has  hitherto  been  supposed  to  be  almost  wholly  restricted  to 
Chinese  residents;  but  the  circumstance  that  the  increase  of 
import  has  been  of  late  in  a  ratio  so  far  in  excess  of  any  ratio 
of  increase  in  Chinese  immigration  suggests  a  probability  that 
the  vice  of  opium-smoking  is  finding  favor  and  adoption  with 
the  native  American. 

Attempts  have  been  made  from  time  to  time  to  estimate  the 
annual  cost  to  consumers  in  the  United  States  and  other  coun- 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.     1 89 

tries  of  distilled  and  fermented  liquors  used  for  the  purpose  of 
drink.  At  the  best,  these  estimates,  no  matter  how  carefully 
prepared,  can  but  be  regarded  as  approximately  accurate,  as 
the  necessary  data  for  forming  an  opinion  cannot  be  obtained 
with  exactness.  The  following  statements  and  inferences  re- 
specting the  cost  of  such  consumption  in  the  United  States 
may,  however,  be  of  some  value  and  interest. 

Assuming  the  present  (1883)  consumption  of  distilled  spirits 
for  drinking  purposes  at  about  60,000,000  proof-gallons  per 
annum,1  the  original  or  first  cost  of  this  quantity  at  25  cents 
per  gallon  would  be  only  $15,000,000.  (The  average  price  of 
proof-spirits  in  Cincinnati,  exclusive  of  the  tax,  for  the  year 
1882  was  24.9  cents  ;  for  1883,  23.8  cents.)  Adding  the  internal- 
revenue  tax  of  90  cents  per  gallon  ($54,000,000)  and  all  the  addi- 
tional taxes  which  the  Federal  Government  imposes  on  the 
whole  business  of  producing  and  vending  distilled  spirits,  i.e. 
licenses,  etc.  ($6,410,764),  and  the  first  cost  would  become 
further  augmented  to  $75,410,764.  (The  census  return  of  the 
value  of  the  entire  product  of  distilled  liquors  in  the  country 
for  1880  was  $41,063,000.)  The  returned  value  of  the  imports 
of  spirits,  of  imitations  thereof,  and  of  champagne  for  1883  was 
$6,906,900,  on  which  the  duties  collected  were  $5,593,869;  mak- 
ing the  aggregate  first  cost  of  such  importations  $12,500,769, 
and  the  total  first  cost  of  the  entire  distilled  spirit  and  imported 
champagne  consumption  of  the  United  States  for  the  fiscal  year 
of  1883  $87,911,533:  of  which  large  sum,  $66,004,633  accrues 
to  the  internal  revenue.  It  will  thus  be  seen  that  the  Govern- 
ment is  the  largest  partner,  and  has  by  far  the  largest  interest, 
in  this  business. 

The  next  question  of  interest  and  importance  is,  To  what  ex- 
tent is  this  aggregate  of  first  market-price  or  cost,  and  of  the  ac- 
companying taxation,  increased  in  the  process  of  distribution  ? 

1  The  number  of  gallons  of  proof-spirits  on  which  the  internal-revenue  tax 
was  paid  for  the  year  1S83  was  76,762,063,  of  which  75.508,785  gallons  were  dis- 
tilled from  grain,  molasses,  etc.,  and  1.253.278  gallons  from  fruit  Of  this 
ag  -rebate,  7  561. 171  gallons  were  withdrawn  from  warehouse  under  the  form  of 
alcohol;  which  would  represent  in  turn  about  14,400.000  gallons  of  proof-spirits, 
and  indicate  a  larger  consumption  of  spirits  for  industrial  and  pharmaceutical 
purposes  than  was  assumed  on  page  166  of  the  first  article  of  this  series. 


I90  PRACTICAL    ECONOMICS. 

The  drift  of  opinion  on  the  part  of  those  who  have  discussed  this 
subject  in  Great  Britain  appears  to  be  that  it  is  about  doubled. 
If  we  assume  this  to  be  the  case  in  the  United  States,  then  the 
ultimate  cost  to  the  consumer  of  the  distilled-spirit  and  cham- 
pagne consumption  in  this  country  from  the  year  1883  would 
be  $175,823,066. 

It  may  here  also  be  mentioned  that  the  value  of  the  stiil 
wines  imported  into  the  United  States  during  the  fiscal  year  1883 
(duties  included)  was  returned  at  $8,827,000. 

The  present  (1884)  domestic  production  and  consumption  of 
fermented  liquors — ale,  lager-beer,  etc. — is  probably  about  18,500,- 
000  barrels,  of  an  average  capacity  of  31  gallons  each ;  or  an  ag- 
gregate of  573,500,000  gallons.  At  an  assumed  valuation  in  the 
hands  of  the  manufacturer  at  $6  per  barrel,  the  resulting  aggregate 
would  be  $111,000,000.  (The  returned  census  valuation  of  the 
malt-liquor  product  of  the  United  States  for  1880  was  $101,088,- 
000.)  The  internal-revenue  tax  of  $1  per  barrel  ($18,500,000),  and 
an  allowance  of  an  equal  sum  to  cover  expenses  and  profits  of 
distribution  to  the  retailers,  would  further  increase  this  original 
cost  as  above  assumed  to  $148,000,000.  If  sold  (retailed)  to  the 
consumer  at  double  this  sum,  the  final  aggregate  figures  would 
be  $296,000,000.  For  the  year  1883  the  value  of  the  importa- 
tions of  ale,  beer,  and  porter — duties  included — was  returned  at 
$1,657,178,  which  to  the  ultimate  consumer  may  be  assumed  to 
represent  an  expenditure  of  at  least  $3,000,000. 

We  have  then,  on  the  basis  of  the  above  figures  and  estimates, 
a  present  direct  annual  expenditure  on  the  part  of  consumers  in 
the  United  States  of  $175,823,000  for  distilled  spirits  (domes- 
tic and  imported)  and  of  champagne,  but  exclusive  of  all  still 
wines ;  and  of  $299,000,000  for  fermented  liquors  of  domestic 
and  foreign  production  ;  or  a  total  annual  aggregate  of  $474,823,- 
000.  This  result  is  much  less  than  the  estimates  that  have 
been  heretofore  made,  and  which  have  obtained  much  credence 
on  the  part  of  the  public ;  and  they  are  also  less  in  comparison, 
as  will  be  directly  shown,  than  the  estimates  of  the  cost  of  simi- 
lar consumption  generally  accepted  as  correct  for  Great  Britain. 
The  main  element  of  uncertainty  pertaining  to  all  these  calcula- 
tions is  in  respect  to  the  extent  to  which  the  original  or  first 
cost  of  the  various  liquors  is  enhanced  in  price  on  their  way  to 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     I9I 

the  ultimate  consumers ;  and  here,  in  the  absence  of  much  defi- 
nite evidence,  there  is  an  opportunity  for  great  latitude  of 
opinion.  It  is  obvious  that  the  price  paid  for  drink  varies 
greatly  according  to  the  circumstances  under  which  it  is  ob- 
tained ;  the  man  buying  each  glass  from  a  public  retailer  neces- 
sarily paying  much  more  per  gallon  than  the  one  who  takes  it 
from  a  cask  or  bottle  at  home  ; '  and  to  accurately  ascertain  how 
final  consumption  is  apportioned  in  these  respects  in  a  nation 
of  55,000,000  is  clearly  an  impossibility.  It  will  also  be  noted 
that  the  above  aggregate  does  not  include  any  estimate  of 
the  cost  of  the  annual  consumption  of  domestic  or  foreign 
wines  other  than  champagne. 

But  assuming  $474,000,000  as  the  minimum  annual  cost  to 
the  consumers  of  distilled  and  fermented  liquors  in  the  United 
States  at  the  present  time,  it  will  be  interesting  to  compare 
this  amount  with  the  returned  value,  according  to  the  census  of 
1880,  of  the  annual  product  of  certain  other  leading  commodities. 
Thus,  the  returned  valuation  of  cotton  manufacturers  for  1880 
was  $2 10,000,000;  of  woollen  goods,  $160,000,000;  of  boots  and 
shoes,  $196,000,000;  of  agricultural  implements,  $68,000,000; 
of  men  and  women's  clothing,  $241,000,000;  of  iron  and  steel, 
$296,000,000 ;  and  of  lumber  planed  and  sawed,  $270,000,000. 
The  amount  of  expenditures  for  public  schools  in  the  whole 
country,  including  building  and  all  other  expenditures,  for  1880, 
was  also  returned  at  $79,339,814. 

This  same  subject  has  also  attracted  much  attention  of  late 
years  in  Great  Britain ;  and  the  results  of  its  investigation  have 
been  presented  in  several  elaborate  papers  to  the  Statistical 
and  other  economic  and  scientific  societies.     The  general  conclu- 

1  Popular  estimates  of  the  cost  of  distilled  and  fermented  liquors  to  consumers 
which  have  obtained  extensive  circulation  and  acceptance  fix  the  retail  price  of 
the  former  at  from  $3.78  to  $6  per  gallon,  and  of  the  latter  at  from  $16  to  $20 
per  barrel,  or  from  50  to  67  cents  per  gallon. 

One  ingenious  writer  has  given  the  following  estimate  of  the  number  of 
drinks  represented  by  the  present  annual  consumption  of  distilled  spirits  in  the 
United  States:  "  Each  gallon  contains  fifty  average  drinks;  which  multiplied  by 
the  total  number  of  gallons  consumed  for  drinking  purposes  (assumed  at  60,000,- 
000  for  1883)  would  give  3,000,000,000  drinks;  which  would  be  at  the  rate  of  over 
54  drinks  per  annum  for  each  man,  woman,  and  child  of  the  present  population, 
estimated  at  55,000,000." 


I92  PRACTICAL    ECONOMICS. 

sions  which  seem  to  be  accepted  as  approximately  accurate  are : 
that  the  amount  paid  for  the  production  and  distribution  of 
alcohol  in  its  several  forms  of  spirits,  beer,  and  wines  in  Great 
Britain  for  the  year  1880  was  from  £120,000,000  ($600,000,000) 
to  £130,000,000  ($650,000,000),  or  a  sum  nearly  double  the 
whole  land-rental  of  the  United  Kingdom.  The  actual  cost  of 
the  production  of  the  raw  materials  used  in  the  aggregate  manu- 
facture of  these  several  products  has  been  estimated  at  about 
£25,000,000,  or  $125,000,000,  and  the  original  cost  of  the 
home  products  and  imports  (including  the  expense  of  manu- 
facturing, but  not  that  of  retailing  and  distribution)  at  about 
£42,000,000  ($210,000,000).  According  to  an  estimate  presented 
to  the  Statistical  Society  of  London,  April,  1882,  by  Mr.  Ste- 
phen Bourne,  the  number  of  persons  employed  in  producing 
the  raw  materials  out  of  which  the  alcoholic  products  annually 
consumed  in  Great  Britain  are  in  turn  manufactured  must  ap- 
proximate 300,000  in  number ;  and  that  nearly  600,000  people 
(workers)  additional  are  employed  in  the  subsequent  and  con- 
tingent manufacturing  and  dispensing  processes;  or  a  total  of 
near  900,000  persons  "whose  occupation  it  is  to  provide  the 
liquor  consumed  in  the  land."  Mr.  William  Hoyle,  an  Eng- 
lish investigator,  who  for  many  years  has  made  this  subject  a 
specialty  for  discussion  and  investigation,  and  who  publishes  an 
annual  report  and  estimates,  in  a  recent  communication  to  the 
London  Times  fixes  the  expenditure  of  the  British  people  for 
the  year  1883  on  intoxicating  liquors  at  $627,386,505,  a  decrease 
of  $3,870,420  as  compared  with  1882.  Accepting  these  con- 
clusions respecting  the  annual  direct  expenditure  of  the  British 
people  for  alcoholic  liquors,  the  estimates  above  given  of  the 
present  annual  expenditure  of  the  United  States  for  like  pur- 
poses would  seem  by  comparison,  as  before  stated,  to  be  too 
small.  But,  on  the  other  hand,  it  should  be  borne  in  mind  that 
the  present  wholesale  market-price  of  crude  spirits  in  the  United 
States,  inclusive  of  the  tax,  is  less  than  half  that  charged  in 
Great  Britain ;  and  that  the  estimates  of  expenditure  for  the 
United  States  as  above  given  do  not  include  the  cost  of  the 
consumption  of  domestic  wines :  so  that,  if  allowance  is  made  for 
these  differences,  the  estimates  for  the  two  countries,  as  above 
given,  will  very  closely  approximate.     But  again,  it  is  to  be  re- 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS.       193 

membered  that  the  population  of  the  United  States  is  at  pres- 
ent almost  one  third  larger  than  that  of  Great  Britain.  In  the 
face  of  such  antagonism  of  results,  there  would  seem  therefore 
but  one  thing  that  could  be  said  in  explanation  ;  and  that  is, 
that  the  latitude  of  opinion  existing,  and  which,  in  the  absence 
of  authentic  data,  is  fully  permissible,  of  the  extent  to  which 
the  wholesale  cost  of  distilled  and  fermented  liquors  is  in- 
creased in  the  process  of  retail  distribution,  warrants,  without 
any  imputation  of  inaccuracy,  a  very  great  discrepancy  of  con- 
clusion as  to  the  aggregate  final  cost  of  spirit  consumption. 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS.1 

in. 

WE  come  next  to  a  consideration  of  the  most  interesting 
and  novel  phase  of  this  history;  namely,  the  financial 
results  and  moral  influences  which  have  followed  the  attempt 
of  the  United  States  to  obtain  a  large  revenue  through  the  im- 
position of  high  taxes  on  distilled  spirits. 

The  first  tax  imposed  by  Congress  after  the  outbreak  of  the 
war,  namely,  under  the  act  of  July  I,  1862,  was  20  cents  per 
proof-gallon,  or  at  the  rate  of  fully  100  per  cent  on  the  then 
cost  of  the  article  taxed.  The  revenue  derived  from  the  same 
for  the  fiscal  year  ending  July  1,  1863,  exclusive  of  the  revenue 
derived  from  licenses  for  the  manufacture,  rectification,  and  sale 
of  spirits,2  was  $3,229,941,  indicating  a  production  of  16,149,950 
gallons,  as  compared  with  a  production  returned  under  the 
census  of  i860,  three  years  previous,  of  90,000,000  gallons. 

The  tax  of  20  cents  continued  in  force  until  March  7,  1864, 
when  the  rate  was  advanced  to  60  cents  per  gallon.     The  rev- 

1  Princeton  Review. 

'  In  addition  to  the  tax  directly  imposed  on  the  distilled  spirit,  the  United 
States  from  the  first  imposed  a  number  of  other  collateral  taxes,  i.e.,  license- 
fees,  permits,  etc.,  on   the   business    of    producing,    refining,    and   vending   of 
spirits,  all  of  which,  altho    assessed  and  collected  independently,  are  included 
under  a  general  return  of  aggregate  revenue  from  distilled  spirits.     Thus  the 
total    revenue  returned   as   collected    in  any    one  year   is  always  considerably 
greater  than  the  receipts  from  the  direct  tax  on  the  spirit  itself.     These  annual 
aggregates  since   the    first   imposition  of   the    tax  have  been  as  follows:    1863 
$5,176,520;     1864,    $30329.149;     1865,    $18,731,422;    1866.    $33,268,171;    1867 
$33,542,695;  1868,  $18,655,630;  1869.  $45,071,230;  1870,  $55,606,094;  1871,  $46, 
281,848;     1872,  $.49, 475, 516;    1873.  $52,099,371;    1874,  $49,444,089;    1875,  $52, 
081,991;  1876,  $56,426,000;  1877,  $57,469,000;   1878,  $50  420.815:  1879,  $52,570, 
284;  1880,  $61,185,508;  1881,  $67,153,974;  1882,  $69,873,408;  1883,  $74,368,775. 

194 


OUR  EXPERIENCE    IN   TAXING  DISTILLED   SPIRITS.     IQ$ 

enue  derived  under  these  two  rates  for  the  fiscal  year  ending 
June  30,  1864,  was  $28,431,798,  and  the  number  of  gallons 
returned  as  having  been  assessed  was  85,295,391. 

On  the  1st  of  July,  1864,  the  tax  on  distilled  spirits  was 
further  raised  to  $1.50  per  proof-gallon,  and  by  the  same  act  it 
was  further  provided  that  the  tax  on  and  after  February  j,  1865, 
should  be  $2  per  gallon.  When  Congress  reassembled,  however, 
on  the  succeeding  December,  the  time  when  the  $2  rate  was 
made  to  take  effect  was  changed  from  the  1st  of  February,  1865, 
to  the  preceding  1st  of  January.  The  revenue  which  was  col- 
lected under  these  two  rates  for  the  fiscal  year  ending  June  30, 
1865,  was  only  $15,995,000.  For  the  fiscal  year  ending  June  30, 
1866, — the  first  full  year  under  the  $2  tax, — the  receipts  were 
$29,198,578  (exclusive  of  $283,409  derived  from  spirits  distilled 
from  fruits),  the  assessment  being  on  14,599,000  gallons. 

With  these  curious  figures  before  us,  let  us  next  inquire 
somewhat  more  in  detail  into  the  course  of  events  of  which  they 
are  the  exponents.  From  the  very  commencement  of  the  war, 
until  its  issues  became  certain,  and  indeed  for  a  considerable 
period  thereafter,  the  attention  of  the  Government  was  so  en- 
grossed with  current  military  events,  foreign  relations,  the 
operations  of  the  Treasury  in  respect  to  the  most  complicated 
and  gigantic  system  of  finance  and  taxation  that  the  world 
has  ever  known,  and  later  with  the  problems  of  the  recon- 
struction of  the  Union,  that  the  efforts  made  to  prevent,  detect, 
and  punish  frauds  in  respect  to  the  revenues  were  almost  abso- 
lutely of  no  account.  Indeed  it  may  be  further  alleged  with 
truth  that  the  spirit  and  working  of  the  revenue  statutes  were 
to  a  very  great  degree  in  the  direction  of  the  encouragement  of 
fraud  and  speculation.  And  while  there  was  also  during  all 
these  times  an  immense  amount  of  patriotism  on  the  surface,  it 
rarely  with  the  producing  and  commercial  part  of  the  com- 
munity struck  in  so  deep  as  to  prevent  them  from  taking 
prompt  advantage  of  any  necessities  or  neglect  of  the  Govern- 
ment, to  benefit  their  individual  and  material  interests.  Thus, 
going  back  to  the  rates  of  taxation  on  domestic  distilled 
spirits,  it  will  be  found  that,  after  the  imposition  of  the  first 
tax  of  20  cents  per  gallon  in  July,  1862,  the  rates  were  three 
times  changed  and  largely  advanced  within  the  short  space  of 


ig6  '    PRACTICAL    ECONOMICS. 

ten  months — namely,  March,  1864,  from  20  to  60  cents;  July, 
1864,  from  60  cents  to  $1.50;  and  January,  1865,  from  $1.50  to 
$2  per  gallon.  There  was,  moreover,  in  each  case — dating  back 
to  the  imposition  of  the  first  tax — ample  premonition  to  all 
interested  that  the  tax  would  be  imposed  or  largely  advanced  ; 
and,  after  the  enactment  of  the  first  tax,  a  feeling  of  almost  ab- 
solute certainty,  which  experience  afterwards  confirmed,  that 
Congress,  under  the  influences  to  which  it  was  subjected,  would 
never  make  the  advance  applicable  to  stocks  on  hand.  The  first 
and  general  result  of  such  legislation  was  to  render  the  great 
business  of  distilling  in  all  parts  of  the  country  almost  altogether 
speculative  and  extremely  irregular.  A  more  special  and  im- 
mediate result  of  the  first  three  and  succeeding  tax  enactments 
was  to  cause  an  almost  entire  suspension  of  distilling,  which 
was  resumed  again  with  great  activity  as  soon  as  an  advance 
in  the  rate  of  tax  in  each  instance  became  probable.  The  stock 
of  spirits  which  accumulated  in  the  country  under  this  course 
of  procedure  was  without  precedent ;  and  as  Congress,  as 
already  stated,  refused  to  make  the  advance  in  taxation  in  any 
instance  retroactive,  it  thereby  virtually  legislated  for  the 
benefit  of  the  distillers  and  the  speculators  rather  than  for  the 
Treasury  and  the  country. 

Under  the  first  tax  of  20  cents  per  gallon,  imposed  July  I, 
1862,  there  was  probably  no  very  great  fraud  perpetrated.  The 
idea  of  systematically  cheating  the  Government  was  new ;  the 
persons  concerned  in  the  business  of  distilling  did  not  fully 
know  how  to  do  it,  and  there  was  in  addition  an  entire  absence 
of  that  record  and  tradition  of  illicit  practices  in  respect  to  mat- 
ters of  revenue  that  forms  a  part  of  the  history  and  romance  of 
almost  every  government  of  Europe,  and  entails  an  hereditary 
disposition  to  smuggle  under  the  customs,  to  evade  under  the 
excise,  and  to  socially  ostracize  every  official  charged  with  the 
execution  of  the  laws  and  the  detection  of  offenders.  But  there 
was  nevertheless  sufficient  whiskey  manufactured  in  anticipation 
of  this  low  tax,  or  which  evaded  the  tax  after  its  enactment,  to 
bring  down  the  legitimate  production  of  the  country  from 
ninety  millions  of  gallons  in  i860  to  sixteen  millions  in  1862-3. 

But  early  in  the  commencement  of  the  new  fiscal  year, 
1863-4,  when  it  became  evident  that  the  great  fiscal  necessities 


OUR  EXPERIENCE  IN  TAXING  DISTILLED   SPIRITS.     1 97 

of  the  Government  would  soon  compel  an  increase  of  all  taxes, 
and  that  distilled  spirits  would  be  one  of  the  first  subjects  upon 
which  the  rate  would  be  raised,  the  situation  speedily  altered ; 
and  with  this  anticipation  all  the  distilleries  of  the  country 
gradually  got  into  full  operation.  The  advance  anticipated  was 
made  on  the  7th  of  March,  1864,  and  was  from  20  to  60  cents 
per  gallon.  The  Internal  Revenue  Bureau  assessed  and  col- 
lected the  spirit-tax  for  that  year  upon  85,295,391  gallons.  Of 
this  great  product — sixty-nine  millions  of  gallons  in  excess  of 
the  product  of  the  preceding  year — at  least  seventy  million  gal 
Ions  were  manufactured  prior  to  the  7th  of  March,  and  were 
released  from  Government  control  by  the  payment  of  the 
20-cent  tax  only;  and  as  after  the  7th  March,  1864,  the  market- 
price  of  the  greater  part  of  this  increased  product,  which 
had  not  been  allowed  to  pass  into  consumption,  was  advanced 
in  accordance  with  the  advance  in  the  tax, — i.e.,  40  cents  per 
gallon, — it  is  clear  that  twenty-five  millions  of  dollars  at  least 
were  thus  at  once  legislated  into  the  pockets  of  the  distillers 
and  speculators. 

Again,  immediately  after  the  imposition  of  the  60-cent  rate 
in  March,  1864,  nearly  all  the  distilleries  once  more  suspended 
operation ;  the  country  was  acknowledged  to  be  overstocked 
with  tax-paid  whiskey,  and  the  Government  almost  ceased  to 
collect  taxes  upon  its  manufacture.  In  May,  however,  the  pro- 
ject for  a  further  increase  in  the  rates  began  to  be  again 
agitated  in  Congress  ;  and  as  soon  as  its  realization  became  prob- 
able all  the  distilleries  speedily  resumed  operations.  How  great 
at  that  time  was  the  capacity  of  the  loyal  States  for  production, 
and  how  actively  the  distilleries  temporarily  worked  under  the 
stimulus  of  a  prospective  increase  in  the  tax,  may  be  inferred 
from  the  circumstance  that  in  the  month  of  June,  1864,  the  num- 
ber of  gallons  distilled  and  on  which  the  Government  collected 
the  60-cent  tax  was  10,468,976,  or  at  the  rate  of  125,000,000  gal- 
lons per  annum ;  while  the  number  of  distilleries  in  the  country, 
which  according  to  the  census  of  i860  was  1 138,  or  in  the  ratio 
of  27,540  persons  to  each  distillery,  had  increased  in  1864  to 
2415,  or  in  the  ratio  of  17,242  persons  to  each  distillery;  and 
how  this  increase  in  distilleries  further  continued  will  be  here- 
after  noted. 


Ig8  PRACTICAL    ECONOMICS. 

On  the  1st  of  July,  1864  (or  of  the  succeeding  month),  the 
tax  was  again  advanced  from  60  cents  to  $1.50  per  gallon  ;  and 
during  that  month  the  entire  product  of  the  country  of  which 
the  revenue  officials  could  take  cognizance  was  only  697,099  gal- 
lons. How  great  a  "  stock  on  hand,"  the  result  of  manufacturing 
under  the  20-  and  60-cent  rates  of  tax,  was  carried  over  the  1st 
of  July  and  experienced  the  advance  of  90  cents  per  gallon  in 
market-price  in  consequence  of  the  advance  in  the  tax  from  60 
cents  to  $1.50,  cannot  be  accurately  known;  but  sixty  millions 
of  gallons  would  certainly  be  a  low  estimate;  and  on  this 
amount  the  profit  that  accrued  to  private  interests  was  at  least 
$50,000,000.  With  the  further  advance  in  the  tax  on  the  suc- 
ceeding 1st  of  January  to  $2,  the  operations  above  described 
were  again  repeated,  with  all  the  benefit  derived  from  former 
experience,  and  with  a  very  large  extension  of  the  sphere  of 
participants  in  the  resulting  profits.  What  was  the  resulting 
profit  from  this  last  transaction  was  estimated,  by  those  who 
had  opportunities  for  forming  an  opinion,  at  from  twenty  to 
thirty  million  dollars. 

In  short,  all  the  available  evidence  indicates  that  the  profits 
realized  by  distillers,  dealers,  speculators,  through  Congressional 
legislation  having  reference  to  the  taxation  of  distilled  spirits 
from  July  1,  1862,  to  January  1,  1865, — a  period  of  two  and  a 
half  years, — and  exclusive  of  any  gains  accruing  from  evasions 
of  taxes,  and  with  every  allowance  for  overestimates,  must  have 
approximated  one  hundred  million  dollars. 

Such,  then,  is  a  brief  but  probably  as  exact  a  narration  as  it 
is  possible  to  now  give  of  what  may  be  regarded  as  the  first  of  a 
long  series  of  subsequent  and  successful  operations  in  the  United 
States  which  have  had  for  their  object  the  spoliation  of  the  gen- 
eral public  for  the  benefit  of  the  comparatively  few  through 
legislative  enactments  or  the  abuse  of  corporate  privileges,  and 
which  was  almost  unnoticed  at  the  time  of  its  occurrence  by 
reason  of  the  far  greater  importance  of  other  and  contempora- 
neous events.  The  transactions  under  consideration,  neverthe- 
less, mark  an  era  in  the  history  of  the  United  States  almost  as 
important  as  the  war  itself;  for  before  that  time  frauds,  in  this 
country,  against  the  Government,  and  trafficking  in  the  interests 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.     IQQ 

of  the  community,  were  always  comparatively  small,  and  were 
never  systematized  on  a  large  scale.  The  moral  sense  of  the 
community  previous  to  that  time  seems  to  have  been  also  more 
impressible  and  less  inclined  to  tolerate  and  overlook  the  pros- 
titution of  influence  and  position  on  the  part  of  men  prominent 
in  public  office  or  trusts  for  the  sake  of  private  gain.  It  was, 
moreover,  the  first  occasion  when  the  outside  influences — 
subsequently  termed  the  "  lobby" — gathered  round  the  halls  of 
Congress  in  notable  numbers,  and  with  acknowledged  influence 
and  organization,  for  the  purpose  of  influencing  legislation  in 
behalf  of  private  and  selfish  interests.  It  was  the  opening  of 
the  flood-gates  for  an  issue  of  corruption  which  has  since  then 
almost  seemed  to  pervade  the  whole  land,  and  which  the  press 
and  the  pulpit  have  not  been  able  to  roll  back.  Since  then, 
also,  nothing  in  this  direction  has  been  too  audacious  to  ven- 
ture, and  there  has  been  little  in  the  way  of  attempt  which 
the  public  has  not  tolerated,  condoned,  or  speedily  forgotten, 
more  especially  if  the  attempt  has  been  accompanied  by 
success. 

One  question,  however,  which  naturally  suggests  itself  at  this 
point  is,  "  What  explanation  can  be  given  of  the  action  of  Con- 
gress in  relation  to  this  whole  matter?"  "  How  happened  it 
that  with  the  lesson  of  experience  repeatedly  before  it  and  made 
a  subject  of  discussion,  Congress  in  successive  instances,  and 
always,  refused  to  make  the  advanced  rates  on  distilled  spirits, 
enacted  solely  on  account  of  the  public  necessity  for  greater 
revenues,  applicable  to  stocks  on  hand,  the  greater  pnrt  of 
which  it  was  acknowledged  had  been  manufactured  solely  for 
the  purpose  of  profiting  by  the  great  advance  in  price  certain  to 
result  from  the  advance  in  the  tax  ?" 

In  reply  it  is  to  be  said  that  it  is  not  easy  to  satisfactorily 
answer  these  questions.  It  is  certainly  impossible  to  charge 
wholesale  corruption  or  improper  motives  against  the  men  in  the 
two  branches  of  Congress  zvho  in  the  main  controlled  and  led  the 
fiscal  legislation  of  this  period.  Thus  among  those  prominent 
in  favoring  exemption  were  Senators  Fessenden,  of  Maine,  and 
Trumbull,  of  Illinois — men  against  whom  the  voice  of  scandal 
never  was  and  never  could  be  raised ;  while  on  the  other  side 
were  Mr.  John  Sherman,  of  the  Senate,  and  Elihu  Washburn, 


200  PRACTICAL    ECONOMICS. 

of  the  House.  The  arguments  brought  forward  in  opposition 
to  making  the  whiskey  taxes  retroactive  were  mainly  that  it  was 
contrary  to  sound  policy  for  the  Government,  after  having 
assessed  and  collected  the  taxes  on  an  article  of  manufacture 
and  released  it  for  sale  or  use,  to  again  reassess  the  same  prop- 
erty before  it  had  been  subjected  to  use ;  and  also  that  it  would 
be  a  matter  of  no  little  difficulty  and  expense  for  the  revenue 
officials  to  find  and  assess  a  product  of  spirits  after  it  had  once 
become  an  article  of  commerce  and  passed  from  the  supervision 
and  custody  of  the  Government.  On  the  other  hand,  it  was 
urged  in  reply  that  it  was  the  custom  of  the  Government, 
Federal  and  State,  to  tax  the  same  articles,  while  awaiting  con- 
sumption and  use,  at  successive  periods — as  stocks  on  hand,  ani- 
mals, and  agencies  of  production  and  transportation ;  and  that 
much  of  the  whiskey  which  it  was  proposed  to  subject  to  the 
surcharge  was  held  in  warehouses  in  quantity  (as  was  afterwards 
proved  to  be  the  fact),  and  so  was  not  difficult  of  ascertainment 
and  assessment. 

In  the  case  of  the  first  two  acts  of  legislation  by  which  the 
tax  was  originally  imposed  and  then  advanced,  there  was  prob- 
ably not  much  speculation  or  participation  of  interest  on  the 
part  of  members  of  Congress  and  revenue  officials.  But  in  the 
case  of  the  last  two  acts,  speculation  and  participation  in  the 
results  of  legislation  were  very  extensive.  The  answer  to  a 
question  put  by  the  writer,  some  twelve  years  subsequent  to  the 
period  of  the  events  related,  to  a  somewhat  prominent  member 
of  Congress  during  the  war,  u  To  what  extent  his  associates 
participated  in  the  speculation  contingent  upon  their  legislation 
respecting  the  whiskey  tax  ?"  substantially  was,"  that  his  personal 
and  certain  knowledge  of  such  transactions  was  very  limited, 
but  that  he  inferred,  from  the  interest  displayed  by  members  in 
the  current  market  rates  and  prices  of  highwines,  the  participa- 
tion to  have  been  very  extensive."  A  personal  interest  was  Con- 
fessed in  a  hundred  barrels,  purchased  under  the  6o-cent  tax 
and  carried  until  disposed  of  under  the  $2  tax ;  and  regret  was 
also  expressed  that,  inasmuch  as  the  legislation  in  question  was 
inevitable,  he  had  not  been  bolder  and  profited  more  largely  by 
his  opportunities.  From  conferences  with  persons  who  were 
formerly  and  at  the  time  officially  employed  under  the  internal 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.     201 

revenue,  and  spoke  from  personal  knowledge,  the  writer  also 
feels  warranted  in  asserting  that  there  was  not  a  revenue  district 
in  the  loyal  States  in  which  distilled  spirits  were  manufactured 
or  largely  dealt  in  at  wholesale,  in  which  the  officials  of  the  reve- 
nue, collectors,  assessors,  inspectors,  gaugers,  clerks,  and  detec- 
tives, were  not  to  a  greater  or  less  extent  engaged  in  speculating 
in  whiskey,  and  consequently  personally  interested  in  favor  of 
Congressional  legislation  looking  to  an  advancement  of  the  rates; 
and  that  the  transactions  in  question  were  not  only  no  secret, 
but  were  regarded  as  perfectly  legitimate.  And  as  a  single 
illustration  of  the  profits  accruing  to  private  parties  and  in  par- 
ticular instances,  a  case  made  known  to  the  Revenue  Commis- 
sioners may  be  referred  to,  in  which  one  firm  manufactured  or 
received  under  contract,  for  a  period  of  several  weeks  prior  to 
the  assessment  of  the  $1.50  tax,  an  average  quantity  of  thirty 
thousand  gallons  of  proof-spirits  per  day:  the  major  part  of 
which  was  held  and  sold  after  the  advance  in  the  tax  in  January, 
1865,  to  $2  per  gallon. 

After  the  establishment  of  the  $2  rate  on  the  1st  of  January, 
1865,  there  was  again  a  period  of  inactivity  on  the  part  of  those 
interested  in  the  manufacture  of  distilled  spirits.  The  stocks 
on  hand,  manufactured  in  anticipation  of  the  advances  in  rates, 
were  very  large,  and,  the  markets  being  oversupplied,  there  was 
little  legitimate  inducement  for  activity  on  the  part  of  distillers. 
The  profits  realized,  or  made  prospectively  certain,  had  been, 
moreover,  enormous,  and  no  further  advance  in  the  rate  of  tax 
could  be  anticipated.  Under  such  circumstances  there  was  an 
apparent  disposition  on  the  part  of  manufacturers  and  specu- 
lators to  wait  and  see  what  developments  in  legislation  and 
business  would  follow  the  now  certain  termination  of  the  war. 

It  was  just  at  this  period  that  the  writer  was  appointed  chair- 
man of  the  "  Revenue  Commission,"  created  by  Congress  under 
an  act  of  March  5,  1865,  for  the  purpose  of  inquiring  into  the 
best  methods  "  of  raising  by  taxation  such  revenue  as  may  be 
necessary  in  order  to  supply  the  wants  of  the  Government/' and 
also  concerning  "  the  sources  from  which  such  revenue  should 
be  drawn  ;"  and  without  any  previous  adequate  preparation,  and 
without  any  fund  of  experience  available  for  guidance,  other 
than  what  could  be  personally  collected  under  the  large  powers 


202  PRACTICAL    ECONOMICS. 

for  investigation  granted  to  the  Commission,  he  entered  upon  his 
duties.  The  task  at  the  outset  seemed  as  hopeless  as  to  attempt 
to  tunnel  a  mountain  with  nothing  but  a  crowbar;  and  one  of 
the  chief  sources  of  embarrassment  was  to  determine,  from  the 
immense  number  of  points  of  detail,  how  and  where  to  begin ; 
for  the  United  States  revenue  system  at  this  time  actually 
touched  directly  every  art,  trade,  profession,  and  occupation  of 
the  country,  and  drew  from  them,  and  largely  by  direct  taxa- 
tion, in  a  single  year  (1865),  the  enormous  sum  of  $559,000,000. 
After  considerable  deliberation  it  was  determined  to  commence 
the  investigations  with  that  one  article  or  department  of  this 
great  tax  system  which  furnished  the  greatest  specific  revenue, 
which  proved  to  be  "  distilled  spirits."  The  theory  which  he 
entertained  at  the  outset  respecting  the  situation  was  the  com- 
mon and  popular  one,  so  far  as  there  was  any  such,  namely,  that 
distilled  spirits  was  a  product  upon  which  it  was  expedient  to 
impose  the  heaviest  burden  of  taxation ;  that  if  the  annual  con- 
sumption of  the  country  averaged  ninety  million  gallons,  as  it 
probably  did  before  the  war,  a  tax  of  $2  per  gallon  would  suffice 
to  pay  all  the  burden  of  interest  on  the  immense  public  debt,  and 
provide  for  its  ultimate  extinguishment  through  a  sinking  fund ; 
and  finally,  that  if  the  high  tax  resulted  in  restricting  consump- 
tion, the  gain  to  temperance  and  morality  would  far  more  than 
counterbalance  any  reduction  of  revenue.  The  method  of 
investigation  adopted  was  as  follows :  A  typical  distillery 
was  first  visited,  and  a  study  made  of  its  machinery  and  sys- 
tem of  operations,  including  the  assessment  and  collection 
of  taxes ;  second,  the  leading  distillers  of  the  country  were 
brought  to  a  conference,  and  their  views  and  wishes  obtained, 
and  in  conjunction  a  large  amount  of  testimony  from  rectifiers, 
wholesale  and  retail  dealers,  was  also  taken :  third,  the  leading 
officials  of  the  Internal  Revenue  Office — assessors,  collectors,  in- 
spectors, and  detectives — were  called  together  at  Washington, 
and  their  opinions  and  experiences  noted.  Finally,  books  were 
consulted  :  and  in  this  particular  the  situation  in  the  United 
States  was  like  that  of  the  snakes  in  Ireland — there  were  none ; 
while,  apart  from  the  British  blue-books,  the  literature  of  all 
other  countries  in  respect  to  the  taxation  of  spirits  was  exceed- 
ingly meagre.  The  result  of  a  long  and  careful  inquiry,  how- 
20 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.    203 

ever,  abundantly  satisfied  the  writer  that  all  his  preconceived 
ideas  on  the  subject,  and  which  were  also  very  generally  the 
ideas  of  Congress  and  the  great  body  of  the  people,  were 
entirely  erroneous ;  that  under  the  influence  of  a  high  tax  and 
a  resulting  high  cost  the  production  and  consumption  of  spirits, 
exclusive  of  the  demand  for  drink,  was  greatly  restricted ;  and 
that  under  the  conditions  of  a  sparse  population  scattered  over  a 
vast  extent  of  territory,  and  a  form  of  government  that  would 
not  admit  of  the  use  of  a  despotic,  inquisitorial,  and  numerous 
police,  the  attempt  to  collect  a  tax  of  a  thousand  per  cent  on 
the  first  cost  of  any  article  was  utterly  impracticable.  In  a 
report  made  to  Congress  in  January,  1866,  it  was  accordingly 
recommended  that  the  $2  tax  be  abandoned  and  a  tax  of  50 
cents  per  proof-gallon,  conjointly  with  a  license  system  for  recti- 
fiers and  dealers,  be  adopted  as  the  rate  most  likely  to  be  pro- 
ductive of  revenue  and  most  efficient  for  the  prevention  of  illicit 
distillation  and  other  revenue  evasions. 

The  report,  altho  attracting  much  attention  by  reason  of  the 
singular  experiences  of  the  preceding  four  years  which  it  de- 
tailed, obtained  no  favor  in  respect  to  its  recommendation  of 
tax  abatement ;  only  two  members  of  Congress  of  any  promi- 
nence, namely,  General  Garfield  and  Hon.  W.  B.  Allison,  of 
Iowa,  both  then  members  of  the  House  and  of  its  Committee 
of  Ways  and  Means,  cordially  accepting  its  conclusions.  The 
result  was  no  legislation,  and  a  new  chapter  of  experience ;  for 
when  it  became  certain  that  the  opportunity  for  realizing  profits 
from  manufacturing  in  anticipation  of  an  increase  in  the  tax 
had  come  to  an  end  by  the  prospective  maintenance  of  rate, 
the  opportunity  for  profit  offered  by  the  imperfections  of  the 
law  was  at  once  eagerly  embraced  and  improved.  Thus,  testi- 
mony subsequently  brought  to  light  repeated  instances  where 
individual  distillers  manufactured,  conveyed  to  market,  and 
fraudulently  sold  spirits,  varying  in  quantities  from  20,000  to 
30,000  gallons  and  upward,  without  a  suspicion  on  the  part  of 
local  officials  that  the  business  was  not  in  all  respects  conducted 
legally  and  honestly.  It  was  sworn  to  before  the  writer  that 
the  determination  of  the  strength  of  spirits,  preparatory  to 
assessment,  was  often  made  by  mere  physical  inspection  or 
taste,  and  that  the  use  of  instruments  (for  which  no  uniform 


204  PRACTICAL    ECONOMICS. 

standard  was  provided)  was  regarded  as  something  wholly  un- 
necessary. It  was  also  not  unfrequently  the  case  that  barrels 
were  inspected  and  branded  some  days  in  advance  of  their 
being  filled,  and  their  future  regulation — filling  and  removal — 
left  entirely  with  the  manufacturer.  Distillers  and  their  work- 
men were  sometimes  constituted  inspectors  of  their  own  pro- 
duct ;  and  in  one  instance  an  assessor  was  appointed  who  did 
not  possess  sufficient  intelligence  to  understand  and  correctly 
use  either  a  gauging-rod  or  an  hydrometer.  Thus  it  was  at 
the  commencement  of  the  period  of  high  taxation  ;  but  subse- 
quently, when  the  administration  of  the  laws  became  somewhat 
more  intelligent  and  vigorous,  and  some  degree  of  concealment 
to  the  projectors  of  fraud  became  necessary,  the  expedients 
successfully  adopted  for  the  evasion  of  the  tax  were  in  the 
highest  degree  characteristic  of  the  people.  One  of  the  most 
fertile  of  these  was  made  available  through  a  provision  of  law 
which  allowed  spirits  to  be  made  and  stored  in  bond,  or  ex- 
ported in  bond,  without  prepayment  of  the  taxes.  Thus,  for 
example,  spirits  deposited  in  bond  were,  through  the  connivance 
and  corruption  of  ill-paid  officials  acting  as  guardians,  secretly 
withdrawn  from  bond,  the  barrels  filled  with  water  or  very  weak 
spirits,  and  subsequently  exported.  On  receipt  of  a  "  landing 
certificate,"  obtained  through  a  consul  of  an  inferior  grade  at 
some  foreign  port,  the  bonds  given  by  the  manufacturer  for  the 
payment  of  the  taxes  were  cancelled,  and  the  profits  derived 
from  the  sale  of  the  untaxed  spirits  in  the  domestic  market,  at 
the  tax-paid  rate,  were  divided  among  all  concerned.  Ware- 
houses from  which  spirits  deposited  in  bond  had  been  fraudu- 
lently withdrawn  were  also  frequently  burned,  and  the  bonds 
cancelled  on  evidence  of  loss,  wholly  fraudulent,  but  so  strongly 
supported  by  perjury  as  to  be  difficult  of  disproof.  Large 
losses  were  also  sustained  by  the  Government  by  the  accept- 
ance, as  the  basis  of  large  transactions,  of  bonds  which  sub- 
sequent investigations,  contingent  on  the  exposure  of  more 
open  frauds,  showed  were  purposely  made  and  given  by  persons 
of  no  responsibility,  who  in  some  instances  by  prearrangement 
agreed  to  accept  the  risk  of  persecution  and  trial,  with  an 
almost  certainty  of  non-conviction  by  a  jury,  for  a  stipulated 
compensation  or  a  share  in  the  anticipated  fraudulent  profits. 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.    20$ 

Congress  enacted  that  in  cases  where  spirits  were  sold  for  less 
than  $2  per  proof-gallon,  the  purchaser  must  show  that  the  tax 
on  the  same  had  been  paid.  The  immediate  response  to  this 
legislation  was  a  decline  in  the  market  price  of  spirits.  For  the 
best  rectifying  houses,  alcohol  distillers,  and  druggists,  who  had 
heretofore  maintained  themselves  by  buying  their  supplies  (*.  c. 
of  illicit  product)  on  the  open  market,  asking  no  questions,  now 
found  that  they  must  evade  the  law  to  meet  competition,  or  give 
up  their  business ;  and  very  many  chose  the  latter  alternative. 
The  methods  of  evasion  adopted  were  numerous  and  simple. 
In  some  instances  fictitious  bills  were  given  by  the  sellers  at  the 
legal  valuation;  others  sold  at  the  legitimate  price  and  then 
made  the  purchaser  a  present  of  other  whiskey  sufficient  to 
reduce  the  cost  of  the  purchase  to  the  market  price.  The 
officials,  in  many  cases,  aided  in  the  violation  of  the  law.  Thus 
the  statute  forbade  the  sale  of  confiscated  spirits  at  less  than 
the  rate  of  tax  ($2)  per  gallon ;  and  if  not  sold  for  so  much, 
the  liquor  was  to  be  destroyed ;  yet,  at  different  sales  by  U.  S. 
marshals,  it  was  bid  off  at  $2  and  the  purchaser  charged  with 
less  than  the  actual  number  of  gallons,  in  order  to  reduce  the 
cost  to  the  market  price  of  illicit  product.  Then  this  law  having 
proved  a  failure  the  Internal  Revenue  Department  issued  a 
stringent  order  that  a  Government  receipt  for  the  tax  should 
accompany  all  sales  in  quantity ;  but  immediately  tax  receipts 
for  tax-paid  spirits  became  abundant,  and  sold  as  freely  in  the 
market  as  the  whiskey  itself.  Congress  also  attempted  to  check 
an  important  class  of  frauds  through  the  removal  of  spirits 
from  distilleries  in  barrels  without  payment  of  the  tax,  with  the 
connivance  of  assessors  and  storekeepers,  by  the  appointment 
of  an  inspector  for  each  distillery,  and  requiring  him  to  be 
paid  by  the  distiller.  But  this  made  him  in  fact  a  creature  of 
the  distiller ;  and  the  inspector  joining  hands  with  the  officials 
he  was  appointed  to  watch,  the  frauds  soon  became  more 
gigantic  than  ever.  Secret  pipes,  connected  with  the  "worm 
tanks"  or  receiving  cisterns,  conveyed  the  spirits  underground  to 
rectifying establishments,often  separated  by  considerable  distance 
(and  in  the  cities  by  intervening  buildings)  from  the  distillery. 
Brands  upon  barrels  certifying  to  inspection  and  tax-payment 
were  largely  forged,  to  authorize  removals ;  and  the  branding 


206  PRACTICAL    ECONOMICS. 

at  that  time  being  merely  through  the  use  of  stencil  plates,  this 
forgery  was  very  difficult  of  detection.  The  permission  to  re- 
move spirits  from  the  distillery  to  a  bonded  warehouse,  in 
anticipation  of  the  payment  of  the  tax  upon  the  same,  was  also 
most  prolific  of  fraud.  Thus  a  permit  would  be  given  to  trans- 
port, say  one  thousand  barrels,  naming  the  destination.  In  place 
of  one  lot  ten  might  be  started  at  different  times  and  by  dif- 
ferent routes.  Should  any  lot  be  seized  on  the  route,  the 
permit  would  be  offered  and  the  spirits  released.  One  lot 
would  go  on  to  warehouse,  the  remaining  nine  find  their  way 
into  market  with  the  taxes  unpaid.  The  next  steps  would  be  to 
take  the  one  lot  that  had  found  its  way  to  the  warehouse,  out 
of  the  warehouse,  under  bonds  for  redistillation,  or  for  a 
change  of  package;  keep  it  out  a  few  days,  take  out  one  half 
the  spirit,  and  return  it,  when  a  pliant  storekeeper  would  give 
the  necessary  certificates  showing  its  return,  and  the  bonds 
given  for  its  removal  would  be  cancelled.  If  the  operators  were 
determined,  as  they  not  unfrequently  were,  to  steal  from  the 
Government  to  the  last  penny,  the  barrels  would  be  returned 
filled  only  with  water.  Under  such  circumstances  the  ware- 
house would  be  speedily  burned,  with  total  loss  of  contents ; 
and  it  was  very  remarkable  how  often,  in  severe  thunder-storms, 
the  warehouses  for  distilled  spirits  seemed  to  become  the  central 
point  in  a  large  district  for  the  attraction  of  the  electric  fluid. 
In  one  instance  where  a  rectifying  establishment,  alcohol  distil- 
lery, and  Government  bonded  werehouse — all  in  the  same  build- 
ing— were  seized  and  the  transactions  of  the  firm  investigated, 
the  bank-book  of  the  storekeeper  in  charge,  whose  legitimate 
salary  was  $5  per  day,  was  found  to  indicate  transactions  that 
could  only  have  been  expected  of  millionaire  merchants ;  while 
among  the  papers  of  the  firm  was  a  letter  from  an  agent  abroad 
urging  further  speedy  shipments  of  spirits  (water?)  in  bond,  and 
containing  the  gratifying  announcement  that  the  consul  had 
assured  him  that  he  "  would  merely  count  the  barrels  exported, 
and  not  examine  their  contents."  In  New  York  City,  landing 
consular  certificates  of  spirits  exported  were  made  merchandise, 
and  obtained  without  difficulty;  and  there  can  be  but  little 
doubt  that  the  "  whiskey-ring,"  in  some  instances,  in  order  to 
have  willing  tools  in  foreign  ports,  actually  had  consuls  ap- 
pointed, and  their  appointments  confirmed  by  the  Senate. 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS,     207 

As  one  further  curious  result  and  feature  of  this  state  of 
things  during  the  last  year  of  the  continuance  of  the  $2  tax, 
the  Committee  on  Retrenchment  of  the  House  of  Representa- 
tives reported  in  March,  1868,  that  the  control  of  the  business 
of  rectifying  spirits,  distillation  of  alcohol,  and  also  the  whole- 
sale dealing  in  spirits,  had  passed,  to  a  very  great  extent,  into 
the  hands  of  the  Jews;  and  that  hardly  any  honest  citizen  was 
engaged  in  any  of  these  departments  of  the  business.  "  For 
three  years,"  continues  this  same  report,  "efforts  have  been 
made  to  collect  this  tax  (7.  e,  of  $2) ;  each  year  the  frauds  have 
increased,  but  not  the  revenue.  The  operators  throughout 
have  possessed  more  ability  than  Congress,  more  shrewdness  than 
the  Revenue  Department.  No  sooner  would  a  regulation  of 
the  department  or  an  act  of  Congress  be  passed  than  means 
would  be  devised  to  evade  it.  The  human  intellect  seems  far 
more  inventive,  and  skill  far  more  effective,  when  to  incentive 
to  gain  is  added  the  chance  of  providing  security  against  detec- 
tion and  punishment."  "  Men  rush  into  schemes  [for  defrauding 
the  Government  under  the  spirit  tax  of  $2]  with  the  same  zeal 
that  enthusiasts  do  to  new  gold  fields." 

It  is  to  be  also  noted  that  the  number  of  licensed  distilleries, 
which  in  1864  was  2,415,  or  in  the  ratio  of  one  to  every 
17,242  persons,  had  increased  in  1868  to  4,721,  or  in  the  ratio 
of  one  to  every  8,058  of  the  population.  In  short,  the  tax 
of  $2  (amounting  to  1,000  per  cent,  advance  On  the  average 
cost  of  manufacture)  and  the  enormous  profits  contingent 
upon  the  evasion  of  the  law,  coupled  with  the  abundant  oppor- 
tunity which  the  law,  through  its  imperfections  and  the  vast 
territorial  area  of  the  country,  offered  for  evasion,  created 
a  temptation  which  it  seemed  impossible  for  human  nature 
as  ordinarily  constituted  to  resist ;  and  the  longer  the  tax  re- 
mained at  a  high  figure,  the  less  became  the  revenue  and  the 
greater  the  corruption.  Thus  during  the  year  1866-7  the  revenue 
directly  collected  in  the  United  States  from  spirits  distilled  from 
other  materials  than  fruits  was  $29,198,000,  and  in  1857  $28,- 
296,000,  indicating  an  annual  product  respectively  of  14,599,000 
and  14,148,000  gallons.  But  during  the  succeeding  year,  1868, 
with  no  apparent  reason  for  any  diminution  in  the  national 
production  and  consumption  of  spirits,  and  with  no  increase, 


Of  TxIX 

JIV1RSJ 


208  PRACTICAL    ECONOMICS. 

but  rather  a  diminution,  in  the  volume  of  imported  spirits,  the 
total  direct  revenue  from  the  same  source  was  but  $13,419,092, 
indicating  a  production  of  only  6,709,546  gallons;  proof-spirits 
at  the  same  time  being  openly  sold  in  the  market,  and  even 
quoted  in  price-currents,  at  from  five  to  ten  cents  less  per  gallon 
than  the  amount  of  the  tax  and  the  average  cost  of  manufac- 
ture. We  have  also  in  these  figures  the  materials  for  approxi- 
mately estimating  the  measure  and  strength  of  the  temptation 
to  evade  the  law,  and  the  amount  of  profit  that  must  have 
accrued  in  the  single  year  1868  from  the  results  of  such  evasion. 
For  as  the  consumption  of  distilled  spirits  in  the  country  during 
that  year  was  probably  not  less  than  50,000,000  gallons,  and  as 
out  of  this  the  Government  collected  a  tax  upon  less  than 
7,000,000,  the  sale  of  the  difference  at  the  current  market-rates 
of  the  year,  less  the  average  cost  of  production  (even  if  esti- 
mated as  high  as  30  cents),  must  have  returned  to  the  credit 
of  corruption  a  sum  approximating  $80,000,000.  To  this  must 
be  added  a  further  unknown  but  undoubted  loss  of  revenue, 
growing  out  of  the  circumstance  that  the  influence  of  suc- 
cessful fraud  in  the  matter  of  spirits  seemed  to  infect  and 
demoralize  almost  every  other  department  of  the  internal 
revenue. 

But  notwithstanding  all  these  facts  were  for  three  years  an- 
nually reported  upon,  and  in  detail,  by  officials  of  the  Treasury, 
and  were  also  generally  recognized  and  commented  on  by  the 
press,  it  was  with  the  greatest  difficulty  that  Congress  could 
be  induced  to  take  any  action  looking  to  remedies  by  the  enact- 
ment of  some  perfect  laws,  by  providing  for  more  efficient 
administration,  or  for  diminishing  the  temptations  to  fraud  by 
diminishing  the  tax;  and  it  was  not  until  the  revenue  from  dis- 
tilled spirits  bade  fare  to  disappear  altogether,  and  the  popular 
manifestations  of  discontent  became  very  apparent,  that  any 
thing  really  was  accomplished  ;  a  report  from  the  Committee 
of  Ways  and  Means  of  the  House  of  Representatives,  in  favor 
of  a  new  law  and  a  reduction  of  the  tax,  having  been  actually 
prevented  in  1867,  and  action  delayed  thereby  a  whole  year,  by 
an  appeal  of  a  leading  member  of  the  Committee — who  has 
since  posed  as  a  great  statesman — for  postponement  of  action, 
on  the  ground  that  it  would  be  derogatory  to  the  honor  of  a 


OUR  EXPERIENCE   IN  TAXING  DISTILLED   SPIRITS.    209 

great  nation  to  confess,  "  after  having  put  down  a  great  re- 
bellion, that  it  could  not  collect  a  tax  of  $2  per  gallon  on 
whiskey."  There  may  have  been  instances  in  history  where 
one  single  speech  of  an  individual  has  led  a  nation  into  war  and 
into  consequent  great  losses  and  expenditures,  but  there  prob- 
ably never  was  a  speech  in  reference  to  the  civil  polity  of  a 
government  which  can  be  proved  to  have  been  as  expensive  as 
the  silly  utterances  above  quoted.  For  reform  being  thus  de- 
layed, the  direct  revenues  from  ail  distilled  spirits  fell  off  in  the 
fiscal  and  succeeding  year,  1868,  to  the  extent  of  $14,874,000  as 
compared  with  the  receipts  from  the  same  sources  for  the  pre- 
vious year,  1867,  or  from  §29,164,000  to  $14,290,000;  while  on 
the  other  hand,  when  by  the  act  of  July,  1868,  the  direct  tax 
was  reduced  to  50  cents  per  proof-gallon,  the  receipts  for  the 
ensuing  and  incomplete  fiscal  year  increased  at  once  to  the 
extent  of  nearly  $20,000,000,  or  from  $14,290,000  in  1868  to 
$33,738,000  in  1S69;  or,  including  all  taxes  on  the  manufacture 
and  sale  of  distilled  spirits,  licenses,  etc.,  from  $18,655,000  in 
1858,  to  $45,071,000  in  1869.  And  as  there  is  no  question  that 
this  advance  might  have  been  realized  through  legislation  in 
the  previous  year  but  for  the  influence  of  the  speech  of  the 
*' statesman"  in  retarding  action,  the  direct  cost  of  his  words 
may  be  fairly  estimated  at  over  twenty-six  millions  of  dollars, 
to  say  nothing  of  indirect  losses  to  the  Treasury  contingent 
on  the  continuance  for  another  year  of  a  system  which  magni- 
fied temptations  and  made  frauds  easy. 

It  is  to  be  here  stated  that  in  preparing  the  law  of  July, 
1868,  by  which  the  direct  tax  was  reduced  from  $2  to  50  cents 
per  gallon,  the  intent  of  the  writer,  which  was  realized,  was  to 
make  the  total  aggregate  tax  65  cents  per  gallon,  but  to  impose 
only  50  cents  as  a  maximum  tax  on  the  spirit  as  an  article 
of  manufacture,  and  to  distribute  the  balance  (15  cents)  in  the 
way  of  licenses,  fees,  etc.,  at  points  intermediate  between  the 
manufacture  of  the  spirits  and  their  final  sale  to  consumers, 
but  so  remote  from  and  so  disconnected  with  the  process 
of  manufacture  as  to  render  collusion  between  producers  and 
distributors  with  a  view  to  gain  by  evading  the  law  almost 
wholly  impracticable.  Another  leading  object  was  to  fix  the 
direct  tax  at  such  a  sum  as  would  diminish  the  temptation  to 


2IO  PRACTICAL    ECONOMICS. 

fraud  to  the  greatest  possible  extent  consistent  with  the  pro- 
curement of  such  an  amount  of  revenue  as  was  demanded  by  the 
necessities  of  the  Government.  The  rate  of  50  cents  per  proof- 
gallon,  recommended  by  the  writer,  who  was  then  "  Special 
Commissioner  of  the  Revenue,"  and  subsequently  adopted  by 
Congress,  was  fixed  upon,  because  investigations  showed  that 
on  the  average  the  product  of  illicit  distillation  costs  through  de- 
ficient returns,  the  necessary  bribery  of  attendants  and  the 
expense  of  secret  and  unusual  methods  of  storage  and  trans- 
portation, from  two  to  three  times  as  much  as  the  product  of 
legitimate  or  legal  distillation.  So  that,  assuming  the  average 
cost  of  spirits  at  that  time  in  the  United  States  to  have  been 
20  cents  per  gallon,  the  product  of  the  illicit  distiller  under 
the  most  favorable  circumstances  would  cost  from  40  to  60 
cents,  leaving  but  10  cents  per  gallon  as  the  maximum  profit 
to  be  realized  from  fraud  under  the  most  favorable  conditions — 
an  amount  not  sufficient  to  offset  the  possibility  of  severe 
penalties  of  fine,  imprisonment,  and  confiscation  of  property, 
which  were  made  essential  features  of  the  new  enactment. 
Another  feature  of  the  new  laws,  never  before  attempted,  was 
a  requirement  that  the  original  taxes  en  the  spirit,  as  well  as 
the  license  taxes  on  its  subsequent  manipulation  and  sale  by  rec- 
tifiers and  wholesale  dealers,  should  be  paid  by  means  of  various 
stamps  affixed  to  the  packages  containing  the  spirits, — which 
stamps,  through  their  numbers,  devices,  and  record,  established 
the  identity  of  the  spirits  wherever  found,  and  their  relations  to 
the  various  tax  requirements.  This  system,  originally  proposed 
and  worked  out  by  the  writer,  was  at  first  violently  opposed  as 
wholly  impracticable  ;  but  was  finally  adopted,  and,  after  some 
modifications  suggested  by  experience,  has  proved  in  the  highest 
degree  practicable  and  successful.  A  similar  stamp  system  for 
collecting  the  internal-revenue  taxes  on  fermented  liquors  and 
smoking  tobacco  was  also,  on  the  recommendation  of  the  writer, 
adopted  by  Congress,  and  has  also  proved  successful. 

In  answer  now  to  a  question  which  those  who  have  followed 
this  narrative  may  naturally  put,  "  What  was  the  sequel  to  this 
radical  change  in  this  department  of  the  revenue  laws  of  the 
United  States  as  it  existed  in  1868?"  it  may  be  said,  without 
the  possibility  of  challenge  or  contradiction,  that  in  the  whole 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.      211 

history  of  political  economy,  finance,  and  jurisprudence  there 
never  was  a  result  that  so  completely  demonstrated  the  value  of 
careful  scientific  investigation  in  connection  with  legislation. 
Illicit  distillation  practically  ceased  the  very  hour  the  new  law 
came  into  operation ;  and  evasions  of  the  law  were  confined  to 
occasional  false  returns,  and  a  re-use,  on  a  very  limited  scale,  of 
the  stamps  with  which  the  tax  was  for  the  first  time  made  pay- 
able by  purchase  and  cancellation.  Industry  and  the  arts  ex- 
perienced a  large  measure  of  benefit  from  the  reduction  in  the 
cost  of  spirits,  more  especially  in  the  form  of  alcohol;  while  the 
Government  collected  during  the  second  year  of  the  continuance 
of  the  new  rate  and  system,  with  comparatively  little  friction, 
three  dollars  for  every  one  that  was  obtained  during  the  last 
year  of  the  two-dollar  tax. 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS. 

(  This  article  is  an  original  contribution  to  this  series.) 
IV. 

IT  is  essential  to  the  completeness  of  this  history,  and  before 
proceeding  further  in  the  course  of  its  direct  narration,  to 
specially  notice,  at  this  point,  another  extremely  interesting 
phase  of  the  attempt  of  the  Government  of  the  United  States  to 
assess  and  collect,  during  the  years  1865-68,  an  extraordinary 
high  tax  on  domestic  distilled  spirits. 

As  soon  as  it  became  evident  that  neither  laws  bristling  with 
pains,  penalties,  and  forfeitures,  nor  increased  vigilance  on  the 
part  of  their  administrators,  would  suffice  to  overcome  the  temp- 
tation created  by,  and  ensure  the  collection  of,  the  tax  of  $2  per 
proof-gallon,  the  American  mind,  with  its  fertility  of  resources,  at 
once  began  to  inquire  if  it  was  not  possible  to  oppose  and  offset  the 
exercise  of  great  mental  ingenuity  for  the  furtherance  of  fraud 
with  the  product  of  equal  ingenuity  for  the  furtherance  of  hon- 
esty ;  or,  in  other  words,  if  it  was  not  practicable  to  assess  and 
collect  the  spirit  taxes  through  mechanical  devices  that  would 
neither  lie,  steal,  nor  be  amenable  to  temptation  to  do  other  than 
what  it  was  their  legitimate  function  to  do,  and  thus  eliminate 
completely,  or  in  a  great  degree,  the  element  of  moral  responsi- 
bility from  the  office  of  government  inspector.  And  this  question 
had  been  hardly  suggested  before  it  began  to  be  answered  by  the 
submission  to  the  Government  (Treasury  Department)  of  such  a 
variety  and  number  of  machines  and  devices  for  solving  the  in- 
volved problem,  that  the  Commission  appointed  to  examine  into 
the  matter,  and  of  which  the  late  Prof.  Henry,  of  the  Smithsonian 
Institution,  was  Chairman,  characterized  the  exhibit  and  contri- 
butions "  as  truly  astonishing,"  and  as  strikingly  illustrative  "  of 
the  prevalence  in  this  country  of  the  inventive  faculty."  ' 

1  It  is  not  the  intent  of  the  writer,  however,  to  here  convey  the  impression  that  the 
idea  of  attempting  to  collect  the  spirit  tax  through  mechanical  methods  was  altogether 


OUR  EXPERIENCE  IN  TAXING  DISTILLED  SPIRITS.      213 

Most  of  these  inventions  or  devices  were  in  the  nature  of 
"  meters,"  designed  to  be  attached  to  the  "  worm,"  or  discharge 
pipe,  of  the  still,  and  with  such  provisions  of  mechanism  as  to 
register  automatically,  and  with  security  against  unlawful  inter- 
ference, not  only  the  quantity  of  liquid  composed  of  alcohol  and 
water  that  passes  from  the  "  worm,"  but  also  afford  the  data 
for  determining  the  amount  of  proof-spirits  (the  basis  for  assess- 
ment) contained  in  the  compound.  The  mechanical  difficulties 
involved  in  the  construction  of  such  a  piece  of  mechanism,  or 
"  meter,"  as  will  perform  all  the  duties  required  of  it,  are  exceed- 
ingly great,  and,  as  experience  so  frequently  proved,  can  only  be 
approximately  overcome  under  any  circumstances.  Thus,  to 
illustrate,  it  may  be  stated  that  the  quantity  of  spirits  contained 
in  a  mixture  of  alcohol  and  water  can  only  be  determined  by  the 
less  specific  gravity  of  the  compound  as  compared  with  pure 
water  ;  but  which  mixture,  however,  is  not  the  same  as  the  average 
specific  gravity  of  the  two  liquids  composing  it,  inasmuch  as 
there  is  a  shrinking  of  bulk  when  alcohol  and  water  are  mingled. 
"  A  quart  of  alcohol  and  a  quart  of  water  when  mixed  form  a 
compound  of  less  volume  than  the  sum  of  the  two  ;  besides  which 
the  specific  gravity  of  the  compound  is  largely  affected  by  heat 
as  well  as  by  the  quantity  of  spirits  it  contains.  Hence  for  ascer- 
taining the  quantity  of  alcohol  in  a  given  amount  of  the  mixture, 
recourse  must  be  had  to  tables  constructed  by  actual  experiment, 
in  which  known  quantities  of  alcohol  are  mixed  with  water  and 
the  specific  gravity  taken  at  different  temperatures.  From  these 
tables  the  quantity  of  spirits  in  a  given  amount  of  the  mixture  is 
determined  by  inspection,  when  the  specific  gravity  and  tem- 
perature at  which  it  is  taken  are  known."  The  essential  elements 
of  a  perfect  spirit-meter  are  therefore  as  follows :  "  It  must  furnish 
automatically  a  registration  of  the  data  for  determining  the  quan- 

original  with  American  inventors  ;  for  the  problem  in  question  had  for  many  years 
previous  occupied  the  attention  of  the  legislators  and  mechanicians  of  Europe,  and  had 
resulted  in  the  practical  employment,  to  some  extent,  of  mechanical  devices  in  both 
Austria  and  Prussia.  But  at  the  same  time  it  is  probably  true  that  American  inven- 
tors, at  the  time  they  interested  themselves  in  the  matter,  had,  as  a  general  thing,  no 
knowledge  of  any  previous  European  experience  in  the  same  direction,  and  also  (as  it 
appeared  from  the  examination  of  the  best  European  results  by  the  Commission)  that 
in  a  very  brief  time  they  not  only  covered  all  the  ground  previously  passed  over  by  for- 
eign inventors,  but  attained  a  much  higher  degree  of  successful  achievement  than  had 
heretofore  been  accomplished. 


214  PRACTICAL  ECONOMICS. 

tity,  the  specific  gravity,  and  the  temperature  of  the  liquid  which 
passes  through  it,  or  give  the  quantity  and  at  the  same  time  re- 
serve samples,  consisting  of  precise  aliquot  parts  of  the  whole,  for 
subsequent  test  with  the  hydrometer.  In  addition  to  all  this,  the 
construction  of  the  meter  must  be  such  as  not  to  render  it  liable  to 
derangement  by  the  ordinary  operations  or  accidents  of  the  dis- 
tillery, or  to  be  tampered  with  for  the  purpose  of  fraud." 

Notwithstanding  these  inherent  difficulties  of  the  mechanical 
problem  in  question,  a  very  large  number  of  most  ingenious 
pieces  of  mechanism,  in  the  nature  of  meters,  were,  as  already 
stated,  offered  to  the  Government,  and  for  each  of  which  a  high 
claim  for  excellence  or  usefulness  was  preferred ;  the  incentive  to 
these  inventions  having  been  the  prospect  that  in  case  of  the 
acceptance  of  any  one  of  them  by  the  authorities,  a  large  profit 
would  result  to  the  inventor  from  the  manufacture  of  the  great 
number  of  machines  that  would  be  required,  and  the  royalty  or 
compensation  that  would  be  given  for  their  use.  And  Congress, 
in  order  to  determine  whether  any  of  them  were  certain  or  likely 
to  accomplish  the  result  desired,  authorized,  in  1868,  the  appoint- 
ment of  a  Commission  of  scientific  men  and  mechanical  experts, 
and  the  fitting  up  of  a  working  distillery  near  Washington  in  order 
to  thoroughly  test  the  whole  matter.    • 

It  is  not  the  province  of  this  article  to  either  enumerate  or 
attempt  to  describe  in  detail  the  construction  of  the  various 
contrivances  examined  or  tested  by  this  Commission ;  but 
those  interested  will  find  all  the  information  desired  in  a  report 
submitted  to  the  40th  Congress,  at  its  2d  session.  (See  Executive 
Document,  House  of  Representatives,  No.  214,  1868.)  It  is  suffi- 
cient to  here  say  that  the  Commission  reported  that  "  none  of  the 
meters  offered  fulfils  all  the  conditions  deemed  necessary  for  a 
perfect  meter,  particularly  in  regard  to  the  quantity  of  proof-spirits 
dependent  upon  temperature  "  ;  and  further,  and  speaking  gener- 
ally, "  that  no  single  apparatus  or  contrivance  for  protecting 
distillation  against  fraud  is  sufficient ;  although  by  the  use  of  a 
meter  and  other  appliances  frauds  may  be  rendered  more  diffi- 
cult, and  their  detection  more  certain."  It  was,  however,  agreed 
that  several  of  the  meters  submitted  to  them  possessed  a  high 
degree  of  excellence  and  usefulness,  and  that  one  in  particular  so 
nearly  fulfilled  the  requirements  of  such  an   instrument   as   to 


OUR  EXPERIENCE   IN   TAXING  DISTILLED  SPIRITS.      21 5 

warrant  a  recommendation  of  its  use  on  the  part  of  the  Govern- 
ment. This  was  the  invention  of  the  late  Mr.  Isaac  P.  Ticc,  a 
man  who  for  ingenuity  is  entitled  to  rank  among  the  most 
remarkable  of  American  mechanics  ;  and  who  had  previously  won 
distinction  by  the  invention  of  a  machine  for  cutting  mouldings 
on  irregular  curved  surfaces — as,  for  example,  a  stair-rail, — and 
during  the  war  period,  when  cotton  became  scarce  and  most 
expensive,  for  the  manufacture  and  extensive  introduction  of 
"  string  "  or  "  twine  "  composed  of  paper.  Mr.  Tice  was  in  fact  the 
pioneer  in  the  United  States,  in  proposing  to  collect  the  tax  on 
distilled  spirits  by  mechanical  methods ;  and  a  hundred  sets  of 
his  meter,  which  was  the  first  that  was  ready  for  practical  use, 
were  ordered  by  the  Treasury  Department,  after  practical  testing, 
in  1867,  or  a  year  before  the  final  report  of  the  Government 
Commission  and  their  obligatory  use  in  all  distilleries. 

In  addition  to  constructions  in  the  nature  of  "meters," 
many  other  very  curious  devices,  all  having  in  view  the  prevention 
or  restriction  of  frauds  in  the  collection  of  the  taxes  upon  spirits, 
were  brought  to  the  attention  of  the  Commission.  One  fruitful 
source  of  fraud  was  the  great  difficulty  of  identifying  any  partic- 
ular lot  of  spirits  after  it  had  passed  out  the  distillery  or  ware- 
house, owing  to  the  facility  with  which  the  official  brands  or 
marks  of  the  inspectors  could  be  removed  or  altered  ;  spirits  inca- 
pable of  identification  on  seizure  as  being  of  illicit  origin,  being 
safe  from  forfeiture.  To  remedy  this  one  inventor  proposed  the 
obligatory  use  of  a  peculiar  barrel-head,  which  should  be  issued 
by  the  Government  the  same  as  stamps,  and  the  peculiarity  of 
which  consisted  in  forming  raised  surfaces  by  turning  concentric 
grooves  in  the  head  of  the  barrel,  and  on  which  surfaces  the 
marks  or  brands  required  by  law,  and  indicating  inspection, 
were  to  be  stamped.  It  was  claimed  that  such  branding  could 
not  be  removed  or  altered  without  so  cutting  or  defacing  these 
raised  surfaces,  that  the  illegal  re-use  of  a  barrel  with  the  pre- 
scribed head  would  be  at  once  evident ;  and  that  every  barrel, 
once  marked  or  branded  with  the  proper  marks  and  numbers  on 
such  surfaces,  would  always  carry  with  it  its  own  history  and 
identification.  Other  inventions  related  to  the  use  of  receipts  and 
coupons  for  tracing  and  identifying  the  track  of  each  barrel  of 
spirits  on  the  way  from  the  distiller  to  the  consumer ;  to  safes 


2l6  PRACTICAL    ECONOMICS. 

for  enclosing  the  meters  when  attached  to  the  stills  ;  to  novel 
forms  of  hydrometers  and  other  distillery  adjuncts  and  appliances. 
Tice's  meter  continued  to  be  used  by  the  Government  as  an  aid 
for  the  collection  of  the  spirit  tax  for  a  period  of  about  four 
years.  There  was  always,  however,  and  from  the  very  first,  an 
opposition  to  it  on  the  part  of  the  distillers ;  in  the  main,  undoubt- 
edly, for  the  reason  that  it  rendered  fraud  more  difficult  than 
under  the  old  methods  of  supervision,  and  partly  because  of  its 
expense  (first  cost,  erection,  and  supervision),  which  the  Govern- 
ment made  chargeable  upon  the  distiller.  With  the  reduction  of 
the  tax  from  $2  to  50  cents  per  proof-gallon  in  1868,  and  the  con- 
clusive evidence  subsequently  afforded  that  the  incentives  to 
fraud  had  thereby  been  greatly  decreased,  and  the  necessity  of  a 
mechanical  safeguard  diminished,  its  employment  was  felt  to 
be  less  necessary,  and  in  1 871,  by  order  of  the  Department,  and 
in  compliance  with  the  wishes  of  the  distillers,  its  obligatory  use 
in  distilling  was  discontinued  ;  and  from  that  time  no  meters  of 
any  kind  have  been  in  use  in  American  distilleries. 

The  specific  tax  on  distilled  spirits  of  50  cents  per  proof- 
gallon  remained  in  force  from  July  1868  to  August  1872,  a  period 
of  a  little  more  than  four  years.  During  this  period  the  tax  was 
assessed  and  collected  on  an  average  production  of  67,175,822 
proof-gallons  per  annum,  yielding  an  average  annual  revenue  of 
$33,563,161,  and  indicating  an  average  annual  consumption  for 
all  purposes  of  the  country  of  about  1.65  proof-gallons  per  capita. 
For  the  period  of  four  years  immediately  preceding  the  fiscal 
year  1868-9,  under  a  tax  of  $2.00  per  proof-gallon  for  three  years, 
and  $1.50  and  $2.00  for  one  year  (1865),  the  tax  was  assessed  and 
collected  on  an  average  annual  production  of  only  8,603,815  proof- 
gallons  per  annum,  yielding  an  average  annual  revenue  of 
$21,727,000,  and  indicating  an  average  annual  consumption  of 
only  about  0.25  proof-gallon  per  capita. 

But,  notwithstanding  these  satisfactory  results,  the  law  autho- 
rizing the  reduction  of  the  tax  from  $2.00  to  50  cents  per  proof- 
gallon  had  hardly  become  operative,  when  agitation  commenced 
for  its  repeal  or  modification.  Speculators  had  the  idea  that 
the  old  scheme  of  increasing  the  tax  after  a  little  lapse  of 
time,  without  making  the  increase  applicable  to  stocks  on  hand, 
was,  with  its  gainful  prospects,  again  within  the  range  of  possi- 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS,       217 

bilities.  The  distillers,  as  was  natural,  chafed  at  being  made 
subject  to  new  restrictions ;  while  very  many  extreme  advocates 
of  temperance,  untaught  by,  and  caring  nothing  for,  the  record  of 
recent  experience,  were  inclined  to  regard  the  new  and  compara- 
tively low  tax  as  impolitic  and  in  the  light  of  the  removal  of  a  bar- 
rier against  the  spread  of  intemperance.  Pending  the  continuance 
of  the  low  tax,  the  Administration  of  the  National  Government 
also  changed.  Gen.  Grant  succeeded  to  the  Presidency  in  1869, 
and  with  that  singular  infelicity  which  characterized  so  many  of  his 
civil  appointments,  he  selected  in  the  first  instance,  for  the  head 
of  the  Internal-Revenue  Bureau,  a  Western  politician,  with  a  large 
preponderance  of  the  demagogue  element  in  his  composition ; 
and  after  a  service  of  about  two  years,  replaced  him  with  a  former 
general  of  cavalry.  It  is  almost  needless  to  say  that  under  the 
administration  of  these  two  appointees,  the  management  of 
politics  and  patronage  was  the  matter  of  prime  consideration,  and 
that  neither  of  them  evinced  any  interest  in,  or  any  knowledge  of 
any  economic  principles  or  experiences.  At  the  same  time  the 
new  Administration,  carrying  out  the  principles  of  what  was  then 
(and  even  now)  claimed  to  be  "  the  best  civil  service  in  the 
world,"  removed  for  political  considerations  nearly  all  the  other 
Internal-Revenue  officials  who  had  been  appointed  or  continued 
in  office  by  the  previous  President  (Andrew  Johnson),  and 
replaced  them  for  the  most  part  with  men  having  little  or  no 
acquaintance  with  the  details  of  the  revenue  system  ;  an  experi- 
ment which  cost  the  country  nearly  nine  millions  of  dollars  in  a 
single  year  in  the  one  department  of  distilled  spirits;  for  to  this 
extent,  and  mainly  from  this  cause,1  the  revenues  from  this  source 
declined  during  the  year  1870-71  ;  recovering  three  and  a  quarter 
millions  in  the  succeeding  year  (1871-72),  as  the  new  officials 
became  more  conversant  with  their  duties.  The  exceptional 
office  of   u  Special  Commissioner  of   the   Revenue,"  which  had 

1  Almost  conclusive  evidence  of  the  truth  of  this  assertion  is  to  be  found  in  the  cir- 
cumstance that,  without  any  change  in  the  fiscal  or  industrial  condition  of  the  country, 
or  in  the  rate  of  tax,  or  law  of  administration  during  the  year  in  question,  the  falling 
off  of  revenue  above  noted,  occurred  mainly  in  the  single  item  of  the  "gallon  tax  "  on 
the  spirit  product,  which  legitimately  could  only  have  occurred  through  decreased  pro- 
duction ;  while  the  revenues  received  from  the  sales  of  wholesale  and  retail  dealers  in 
spirits  during  the  same  year,  collected  under  a  different  system  of  administrative 
inspection,  in  place  of  showing  a  corresponding  decrease,  actually  increased  ;  a  result 
that  could  only  have  been  attained  through  an  increased  popular  consumption. 


218  PRACTICAL    ECONOMICS. 

expired  by  limitation  of  law,  having  been  also  discontinued  by 
Congress  in  accordance  with  the  desire  of  the  then  Secretary  of 
the  Treasury,  and  there  being  in  consequence  no  officer  whose 
duty  it  was  to  specially  report  on  the  working  of  the  revenue 
system,  all  the  circumstances  for  again  effecting  a  change  in 
the  rate  of  tax  on  distilled  spirits  were  thus  made  favorable ; 
and  this  change,  Congress  in  June,  1872,  decided  to  make,  by 
advancing  the  direct  tax  from  50  to  70  cents  per  proof-gallon ; 
spirits  on  hand  being  again  excepted.  The  argument  which 
carried  weight,  and  was  mainly  instrumental  in  inducing  action 
by  Congress,  was  exceedingly  specious  (apparently  fair),  and 
involved  so  many  points  of  economic  interest,  that  any  narrative 
of  the  events  under  consideration  would  be  incomplete  that  failed 
to  exhibit  it  with  somewhat  of  detail. 

Thus,  when  the  proposition  was  first  made  to  reduce  the  tax 
from  $2  to  50  cents  per  proof-gallon,  the  object  was  not  to  relieve 
the  manufacture  of  distilled  spirits  from  any  burden,  for  it  was 
generally  agreed  that  it  was  desirable  to  collect  as  much  revenue 
as  possible  from  this  branch  of  production  or  business ;  but 
wholly  with  a  view  of  putting  a  stop  to  an  acknowledged  wide- 
spread system  of  fraud,  and  of  enabling  the  Government  to 
collect  from  spirits  a  reliable  and  legitimate  revenue.  And  ac- 
cordingly in  advocating  the  reduction  of  the  gallon  tax  to  50 
cents,  the  writer,  as  has  been  before  stated  (see  preceding  article), 
proposed,  as  an  essential  feature  of  this  scheme  of  revenue  reform 
to  compensate  in  part  for  such  reduction,  by  imposing  certain  new 
and  supplementary  taxes  on  the  spirit  product,  at  points  so  sepa- 
rate from  the  immediate  results  of  manufacture — namely :  measure- 
ment, storage,  and  local  transportation — as  to  prevent  the  col- 
lusion of  separate  interests,  or  the  employment  of  any  common 
methods  or  agencies  for  the  purpose  of  tax  evasions ;  care  being 
at  the  same  time  taken  to  avoid  fixing  such  supplementary  taxes 
at  rates  so  high,  as  to  create  any  new  and  undue  temptations  for 
fraudulent  practices.  And  with  this  intent,  there  was  incorpo- 
rated with  the  act  reducing  the  gallon  tax  to  50  cents,  the  fol- 
lowing other  taxes  which  had  not  previously  formed  a  part  of  the 
(spirit)  revenue  system : 

FIRST,  a  so-called  "capacity-tax,"  or  tax  on  each  distillery, 
proportioned  to  its  capacity  for  spirit-production  as  determined 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS.      219 

by  a  Government  survey.  Thus,  on  all  distilleries  having  an  aggre- 
gate capacity  for  mashing  or  fermenting  20  bushels  of  grain,  or 
less,  or  60  gallons  of  molasses,  or  less,  in  24  hours,  the  capacity- 
tax  per  day  was  fixed  at  $2,  and  on  distilleries  of  greater  capacity, 
an  addition  of  $2  per  day  was  levied  for  every  20  bushels  of  grain, 
or  60  gallons  of  molasses,  increased  capacity.  It  was  assumed, 
moreover,  that  every  distillery  worked  continuously,  unless  a" 
Government  permit  or  certificate  authorizing  and  defining  its  sus- 
pension could  be  exhibited.  SECOND,  a  special  annual  tax  was 
imposed  on  all  distillers,  proportioned  to  their  aggregate  annual 
production ;  distillers  producing  100  barrels,  or  less,  per  annum 
paying  $400,  while  for  those  distilling  in  excess  of  this  quantity, 
$4  additional  was  charged  for  every  barrel  of  product  over  100 
barrels.  Each  distiller,  moreover,  was  compelled  to  reimburse  to 
the  Government  all  the  expenses  incurred  by  it  for  compensation 
to  gaugers  and  store-keepers  who  were  detailed  to  his  establish- 
ment, and  in  this  way  an  inducement  in  the  shape  of  diminished 
expense  was  offered  to  every  distiller  to  conduct  his  establishment 
in  such  a  manner  as  to  require  the  minimum  of  employment  of 
governmental  officials.  The  tax  per  gallon,  therefore,  although 
nominally  but  50  cents,  was  in  reality  much  greater,  and  in  fact 
finally  approximated  to,  if  it  did  not  fully  equal,  the  sum  of  75 
cents.1  How  fully,  furthermore,  experience  vindicated  the  correct- 
ness of  the  theory  which  prompted  the  idea  of  these  supplemen- 
tary taxes  is  shown  by  the  fact,  that  the  revenues  of  the  so- 
called  "  capacity  "  and  "  barrel  "  taxes  for  the  year  1 87 1-2,  the  last 
full  year  of  the  50-cent  rate,  were  $2,010,986  and  $6,489,786  re- 
spectively, or  $8,500,772  in  the  aggregate  ;  a  sum  representing 
nearly  two  thirds  of  the  revenue  directly  collected  in  1868  under  the 
$2-gallon  tax,  from  the  entire  spirit  product  of  the  country.  Very 
curiously,  however,  the  merits  and  success  of  these  supplemen- 
tary taxes  were  made  the  basis  of  the  strongest  and  almost  only 
argument  presented  to  Congress,  by  those  who  had  not  sufficient 
intelligence  to  comprehend  and  appreciate  the  economic  principle 
involved  in  them,  or  whose  pocket  interests  were  antagonistic,  for 
a  repeal  of  the  50-cent  gallon  tax  and  the  imposition  of  a  specifi- 
cally higher  rate ;  it  being  urged  that  it  was  in  accordance  with 

J  A  calculation  made  by  the  Chamber  of  Commerce  at  Cincinnati  made  the  whole 
tax  on  a  gallon  of  whiskey  {in  first  hands)  under  the  law  of  1 868,  63.47  cents. 


220  PRACTICAL    ECONOMICS. 

all  sound  principles  of  political  economy  to  concentrate  rather 
than  diffuse  and  multiply  taxes,  and  that  if  the  " gallon, "the 
"  capacity,"  and  the  "  barrel "  taxes  were  all  consolidated  into 
one  tax,  and  that  imposed  on  the  gallon,  the  same  amount  of 
revenue  could  be  collected  with  much  less  friction  and  expen- 
diture. And  ostensibly  under  the  iufluence  of  this  argument, 
•Congress,  in  June,  1872,  by  an  act,  which  took  effect  in  the  fol- 
lowing August,  increased  the  "  gallon  "  tax  to  70  cents,  and  at 
the  same  time  repealed  the  "  capacity  "  and  "  barrel  "  taxes.  The 
immediate  result  of  this  legislation  is  best  indicated  by  the  state- 
ment: that  during  the  last  year  (1871-2)  of  the  50-cent-gallon 
tax,  the  quantity  of  spirits  distilled  from  materials  other  than 
fruits  upon  which  the  Government  assessed  and  collected  the 
tax,  was  65,145,880  gallons,  while  in  1874,  the  second  year  of  the 
70-cent  tax,  the  quantity  of  like  spirits  upon  which  this  rate  was 
collected,  was  only  61, 8 14,800  gallons,  a  falling-off  of  over  3,000,000 
gallons,  notwithstanding  an  increase  in  the  meantime  in  the  popu- 
lation of  the  country  of  about  two  millions.  On  the  other  hand, 
it  should  in  fairness  be  also  stated  that  the  country,  financially  and 
industrially,  was  far  less  prosperous  in  1874  than  it  was  two  years 
previous,  or  in  1872.  But  at  this  point  commences  the  record  of  a 
period  of  such  utter  and  shameless  corruption  on  the  part  of 
high  officials  of  the  Federal  Government,  and  in  connection  with 
the  administration  of  the  Internal-Revenue  laws  pertaining  to 
distilled  spirits,  as  finds  no  parallel  in  any  previous  experience 
of  the  country ;  and  for  the  complete  narration  of  which  the 
opportunity  has  possibly  even  yet  not  arrived.  The  essential 
circumstances  of  the  case  are,  however,  as  follows : 

When  the  act  of  1868,  reducing  the  gallon  tax  on  distilled 
spirits,  was  passed,  illicit  distillation,  as  before  stated,  practically 
ceased.  In  saying  this,  it  is  not  pretended  that  it  was  absolutely 
and  entirely  suspended,  for  with  any  tax  on  such  a  product, 
there  will  undoubtedly  be  always  some  evasions  of  the  law,  as 
circumstances  favor.  But  it  existed,  if  at  all,  to  a  very  small 
extent,  and  ceased  to  attract  the  attention  of  the  public.  The 
general  removal  and  replacement  of  revenue  officials  during  the 
earlier  years  of  Gen.  Grant's  first  administration  undoubtedly, 
however,  favored  the  revival  of  fraud,  and  in  1871  a  large  number 
of  distilleries  in   Missouri  were  seized    and  proceedings  against 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.      221 

their  proprietors  instituted.  The  political  excitement  in  this 
State  was  at  that  time  very  great.  A  strong  party,  nominally  Re- 
publicans, headed  by  Carl  Schurz  (who  at  that  time  represented 
Missouri  in  the  United  States  Senate),  were  opposed  to  Gen. 
Grant,  and  it  was  reasonably  apprehended  that  their  influence 
during  the  succeeding  year  would  be  most  antagonistic  to  his 
renomination  and  election.  To  meet  and  overcome  this  oppo- 
sition and  secure  the  vote  of  Missouri  for  Gen.  Grant's  renomina- 
tion was,  therefore,  regarded  by  the  Federal  office-holders  of  that 
State  as  their  first  duty,  and  for  accomplishing  such  results  a  sup- 
ply of  funds  (money)  was  most  important.  Under  such  circum- 
stances the  idea  of  taking  advantage  of  the  condition  of  the 
proprietors  of  the  distilleries  in  difficulty  with  the  Government, 
appears  to  have  first  suggested  itself ;  it  being  but  reasonable  to 
suppose  that  such  proprietors,  if  their  offences,  with  great  con- 
tingent fines  and  other  penalties,  could  be  compromised  or  wholly 
abandoned  in  respect  to  prosecution  by  the  suppression  of  evi- 
dence or  other  action  on  the  part  of  the  Federal  officials,  would 
in  turn  gladly  contribute  most  liberally  for  such  political  expendi- 
tures as  their  friends  might  indicate.  It  is  almost  needless  to  say 
that  this  idea,  once  suggested,  was  promptly  carried  out.  A  gen- 
eral assessment  was  laid  on  all  the  distilleries  in  the  Missouri 
district,  with  the  understanding,  on  the  one  hand,  that  the  pro- 
ceeds were  to  be  used  as  a  campaign  fund  to  promote  the  interests 
of  the  Administration,  and  on  the  other,  that  the  contributors 
were  to  be  favored  and  protected  as  far  as  possible  by  the  revenue 
officials  and  the  representatives  of  political  power  and  patronage 
at  Washington.  How  much  money  was  raised  in  the  year  pre- 
ceding the  Presidential  election  of  1872,  and  professedly  used  in 
the  preliminary  State  elections,  is  not  known,  but  enough  to  buy 
the  support  of  leading  newspapers  which  were  before  in  opposi- 
tion, and  accomplish  generally  the  ends  proposed.  Writing  on 
this  subject  at  a  later  period,  Col.  Wm.  M.  Grosvenor,  who  at  the 
inception  of  these  transactions  was  editor  of  the  St.  Louis 
Democrat,  and  in  a  position  to  know  whereof  he  spoke,  said  : 

"  More  than  one  distiller  has  told  me  how  he  was  induced  to 
contribute,  and  how,  if  he  objected  to  fraud,  he  was  forced  to 
choose  between  participation  in  the  Ring  or  bankruptcy.  If  dis- 
tillers or  rectifiers  declined  to  act  with  the  Ring,  care  was  taken 


222  PRACTICAL    ECONOMICS. 

to  entrap  them  in  some  apparent  or  technical  violation  of  the  law. 
Then  their  establishments  were  seized,  and  they  were  told  to  see 
Mr.  Ford  (the  Internal  Revenue  Collector).  When  they  saw 
Ford  they  were  told  to  go  to  some  other  parties  not  officially 
connected  with  the  Government,  who  explained  that  if  they  (the 
distillers)  did  as  was  desired,  there  would  be  no  trouble  ;  if  not, 
they  would  be  prosecuted  and  convicted  of  violation  of  law,  and 
bankruptcy  would  be  inevitable." 

During  the  year  of  the  Presidential  election  (1872)  Mr.  Gros- 
venor  expresses  the  opinion  that  about  a  thousand  dollars  per 
week  was  paid  to  the  editor  of  one  Administration  paper,  but  that 
this  large  sum  constituted  "  but  a  very  small  part  of  that  portion 
of  the  profits  which  distillers  were  required  to  pay,"  and  that  of 
the  whole  amount  about  40  per  cent,  went  into  the  pockets  of  the 
higher  officials. 

"  One  portion  always  went  to  the  '  man  in  the  country,'  a 
phrase  supposed  to  refer  to  somebody  in  Washington,  for  there 
was  needed,  and  there  was  secured,  somebody  at  Washington  to 
give  the  Ring  warning  of  the  Treasury  investigations  and  stop  all 
complaints  from  reaching  the  Secretary  or  the  President.  Yet 
complaints  were  forwarded,  sometimes  to  the  Secretary  and  some- 
times to  the  President  himself,  without  result.  If  investigations 
were  ordered,  either  the  person  selected  and  sent  out  (to  investi- 
gate) was  one  whose  eyes  and  ears  could  be  closed  with  a  bribe, 
or  the  Ring  was  warned  by  telegraph  before  he  had  left  Wash- 
ington, and  had  ample  time  to  put  every  thing  in  readiness  to 
receive  him  with  equanimity.  That  complete  immunity  was 
thus  secured  at  an  early  day  is  certain." 

Whatever  was  mysterious  in  these  statements  of  Mr.  Grosvenor 
at  the  time  they  were  written  was,  however,  explained  to  a  great 
extent  at  a  later  period,  when  the  Private  Secretary  of  the  Presi- 
dent of  the  United  States,  the  Chief  Clerk  of  the  U.  S.  Treasury 
Department,  who  had  previously  been  chief  clerk  of  the  Internal- 
Revenue  Bureau,  and  the  Supervisor  of  Internal  Revenue  for  trie 
Missouri  District  (who  was  appointed  by  Gen.  Grant  in  spite 
of  the  earnest  protest  of  Carl  Schurz  and  other  leading  men  in 
St.  Louis),  were  all  indicted  and  tried  for  frauds  on  the  revenues, 
and  the  two  latter  convicted  and  sentenced  to  State  Prison.  It 
was  also  shown  on  his  trial  that  $200  per  week  was  regularly 
set  aside  by  the  Ring,  as  the  compensation  of  the  Chief  Clerk. 

The  Presidential  campaign  of   1872   having  ended  with  the 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.      223 

re-election  of  Gen.  Grant,  the  motive  originally  assigned  as  a  rea- 
son for  collusion  between  the  Government  officials  and  the  distil- 
lers could  of  course  be  no  longer  pleaded.  It  was  not,  however,  to 
be  expected,  that  a  mine  of  wealth  that  had  been  so  long  and  so 
profitably  worked  would  be  at  once  abandoned  ;  and  as  a  matter 
of  fact,  the  frauds,  instead  of  decreasing,  increased ;  while  the  per- 
sons concerned  became  more  audacious,  and  extended  their  opera- 
tions to  New  Orleans  and  most  of  the  other  important  Western 
and  Southwestern  cities.  The  members  of  the  Ring,  furthermore, 
says  Col.  Grosvenor : 

"  Openly  boasted  that  it  had  a  power  at  Washington  which 
could  not  be  resisted  or  broken.  Moreover,  the  members  undoubt- 
edly believed  it  themselves.  They  did  not  go  about  like  men  who 
had  any  thing  to  hide.  Diamonds,  for  which  official  salaries 
would  not  account,  were  worn  openly  and  purchased  several 
thousand  dollars'  worth  at  a  time,  without  attempt  at  conceal- 
ment. Officials  with  moderate  salaries  lived  with  their  families  at 
hotels,  expending  obviously  more  than  their  known  incomes,  and 
yet  made  open  purchases  of  costly  summer  residences.  If  whiskey 
operators  or  discharged  revenue  officials  threatened  to  make  ex- 
posures at  Washington,  they  were  kindly  invited  to  '  expose  and 

be .'     One  at  least  tried  it,  and  made  a  dead  failure,  came 

back  to  St.  Louis,  and  was  told  he  had  better  keep  his  mouth 
shut  in  the  future,  or  he  would  get  into  the  penitentiary  for 
defrauding  the  Government.  When  McDonald  (the  supervisor 
afterwards  convicted  and  sent  to  the  State  Prison)  went  to  Wash- 
ington, he  was  received  by  the  President  and  rode  with  him  on  the 
avenue.  When  the  President  visited  St.  Louis,  McDonald  was 
usually  in  his  company,  and  as  late  as  October,  1874,  when  the 
President  visited  the  Fair,  in  the  presence  of  50,000  people, 
McDonald  was  at  his  side." 

At  the  same  time  the  President  (according  to  McDonald's 
subsequent  confession)  accepted  as  a  gift  from  McDonald  and 
his  secretary,  one  Joyce,  a  pair  of  horses,  a  carriage,  and  gold- 
mounted  harnesses,  valued  at  more  than  $5,000. 

Matters  continued  in  much  the  same  way,  without  attracting 
any  marked  attention  on  the  part  of  the  public,  and  without  any 
serious  interference  on  the  part  of  the  Government,  until  the  com- 
mencement of  the  year  1875,  when  the  Hon.  Benjamin  F.  Bristow 
— a  man  of  great  ability  and  integrity, — who  had  been  appointed 
Secretary  of  the  Treasury  in  the  previous  June  (1874),  and  who 
had  been  gradually  growing  suspicious  that  the  Government  was 


224  PRACTICAL    ECONOMICS. 

being  largely  defrauded  in  its  collection  of  revenue  from  spirits 
manufactured  in  several  of  the  large  cities  of  the  country,  deter- 
mined to  institute  a  searching  investigation.1  And  as  a  preliminary 
step,  he  ordered  on  the  26th  of  January,  1875,  a  change,  to  take 
effect  on  the  15th  of  February,  in  the  location  and  assignment  of 
the  ten  officers,  known  as  "Supervisors,"  to  whom,  in  pursuance 
of  an  act  of  Congress,  the  general  supervision  of  the  working  of 
the  Internal-Revenue  laws,  in  as  many  different  sections  of  the 
country,  was  intrusted  ;  the  idea  being,  that  through  such 
changes  frauds  would  be  likely  to  be  uncovered,  by  reason  of  a 
lack  of  understanding  between  the  distillers  and  the  new  officials ; 
or,  in  other  words,  if  there  really  were  any  honest  supervisors, 
they  would  readily  detect  the  complicity  or  neglect  of  their  pre- 
decessors, and  the  manner  in  which  the  frauds  were  being  perpe- 
trated. The  mischief  which  such  a  measure  entailed,  being, 
however,  at  once  apparent  to  the  "  Ring,"  its  immediate  suspen- 
sion or  annulment  became  to  them  indispensable  ;  and  such  was 
their  influence  at  Washington,  that  on  the  4th  of  February  the 
President  officially  and  indefinitely  suspended  the  order  of  the 
Secretary,  and  the  changes  comtemplated  were  prevented.     Then 

1  One  of  the  most  interesting  and  perhaps  the  primary  incident  that  developed  the 
suspicions  of  fraud  entertained  by  the  Secretary  and  the  public  into  almost  certainty, 
and  one  which  the  "Ring"  could  not  have  well  anticipated,  or  if  anticipated,  could 
not  have  prevented,  was  the  publication  in  1874  by  the  Merchants'  Exchange  Associa- 
tion of  St.  Louis,  in  their  annual  report,  of  the  movements — receipts  and  shipments — of 
distilled  spirits  in  that  city  during  the  previous  year.  For  when  certain  persons,  curious 
in  statistical  inquiries,  compared  the  receipts  and  shipments  thus  published,  with  the 
official  (Government)  reports  of  the  spirits  produced  and  paying  tax  in  St.  Louis,  it  at 
once  became  evident  that  the  quantity  locally  consumed  and  shipped  was  greatly  in 
excess  of  the  quantity  received  and  reported  as  manufactured  ;  which  excess  represented 
at  that  time  a  loss  to  the  revenues,  in  the  city  of  St.  Louis  alone,  of  about  $1,200,000 
per  annum.  This  suggested  a  new  mode  of  detecting  the  fraud — namely  :  an  examina- 
tion of  the  bills  of  lading,  or  other  commercial  reports  of  receipts  and  shipments  ;  and 
without  communicating  his  purpose  to  any  of  the  Treasury  officials,  Secretary  Bristow 
commissioned  Mr.  Coloney,  then  the  commercial  editor  of  the  St.  Louis  Democrat,  to 
make  the  investigation.  Mr.  Coloney  accordingly  "  proceeded  first  to  collect,  as  if  for 
his  newspaper,  a  complete  statement  of  every  bill  of  lading  or  shipment  during  the 
year ;  not  of  whiskey  alone,  but  of  all  other  important  articles,  so  that  his  object  was 
not  suspected  "  And  when  this  was  accomplished,  a  comparison  of  the  shipments  by 
operators  in  whiskey  at  St.  Louis  with  the  reports  transmitted  to  Washington  by  the 
revenue  officials,  furnished  at  once  conclusive  proof  of  fraudulent  practices  by  a  large 
number  of  persons  and  establishments,  and  made  possible  the  complete  overthrow  of  the 
most  powerful  conspiracy  ever  formed  against  the  revenue  service  in  this  country. 


OUR  EXPERIENCE   IN   TAXING  DISTILLED   SPIRITS.       225 

followed  an  experience  which  has  no  parallel  in  recent  times  in 
any  country  in  Christendom,  and  the  mere  recital  of  which  car- 
ries one  back  in  memory  to  the  old-time  governments  of  Central 
Asia,  or  of  Turkey,  or  possibly  to  France,  under  the  amini 
regime,  when  intrigue,  distrust  of  all  surroundings,  and  ability  to 
conceal  and  mislead  in  respect  to  real  intentions,  were  regarded 
as  the  prime  essentials  of  successful  statesmanship.  For  it  was  to 
a  policy  akin  to  this,  that  the  Secretary  of  the  Treasury  manifestly 
felt  himself  compelled  to  resort,  when  the  suspension  of  his  order 
for  the  change  of  supervisors  clearly  demonstrated  that  he  must 
first  outwit  the  officials  of  the  Government  with  whom  he  was 
associated,  if  he  was  to  be  able  to  prosecute  his  investigations  to 
the  end  of  maintaining  the  law  and  of  exposing  and  punishing 
corruption.  In  place,  then,  of  giving  any  further  instructions  to 
the  officers  of  the  Government  specially  charged  with  the  ad- 
ministration of  the  revenues  to  enforce  the  laws,  he  carefully 
concealed  from  them  his  intentions, — even  resorting  to  the  inven- 
tion of  a  new  cipher  for  telegraph  and  other  correspondence ;  and 
in  their  place,  employed  new  and  unofficial  agents  to  bring  his 
plans  to  maturity.  And  so  successful  was  he  in  this,  that  not 
only  were  the  suspicions  of  the  conspirators  in  a  great  measure 
allayed,  but  plans  even  were  formed  by  them  for  inducing  the 
President  to  summarily  remove  the  Secretary  himself  from 
office.1 

Meantime  the  subject  of  again  increasing  the  gallon  tax  on 
distilled  spirits  had  been  brought  before  Congress,  and,  on  the 
3d  of  March,  1875,  a  bill  was  passed,  raising  the  rate  from  70  to 
90  cents  per  gallon.  There  was  comparatively  little  debate  in 
either  House  of  Congress  on  the  merits  of  the  proposition,  mem- 
bers apparently  feeling  that  the  topic  had  already  been  sufficiently 
discussed,  and  only  one  prominent  member  of  the  dominant 
party  in  Congress — Hon.  John  Sherman — vigorously  protested 
against  its  favorable  consideration.  It  was,  moreover,  recognized, 
from  the  first,  as  a  measure  introduced  and  favored  by  the  Ad- 

1  I  stopped  at  the  Arlington  House  (Washington,  April,  1875),  where  I  met  Sena- 
tor Dorsey,  of  Arkansas,  and  to  whom  I  told  my  story  of  the  manner  in  which  Secre- 
tary Bristow  was  interfering  with  my  affairs.  The  Senator  advised  me  to  join  him 
in  a  determined  effort  to  influence  the  President  to  dismiss  Bristow,  a  suggestion  which, 
if  I  had  acted  upon,  would  have  undoubtedly  prevented  any  exposure  of  the  "  Ring." 
— "Confessions  of  McDonald,"  p.  132. 


226  PRACTICAL    ECONOMICS. 

ministration;  the  Chairman  of  the  Commitee  of  Ways  and  Means 
in  the  House  and  his  political  associates  stating  in  all  seriousness, 
when  the  bill  was  first  reported,  and  as  a  reason  for  their  endorse- 
ment of  it,  that  the  Commissioner  of  Internal  Revenue  —  the 
same  official  *who,  some  three  months  later,  was  summarily  dis- 
missed from  office  for  suspected  complicity  with  fraudulent  trans- 
actions— was  of  the  belief,  that  a  dollar  tax  "  could  be  collected 
with  the  same  fidelity  which  accompanies  its  collection  of  seventy 
cents n;x  and  "  I  agree  with  the  Commissioner  in  his  confident 
.judgment  that  he  can  collect  a  tax  of  a  dollar  per  gallon." ' 
On  the  other  hand  it  was  brought  out  during  the  considera- 
tion of  the  bill  in  the  House,  that  the  Secretary  of  the  Treas- 
ury had  written  to  the  Committee  of  Ways  and  Means,  that 
he  did  not  agree  in  opinion  with  the  Commissioner,  and 
regarded  any  increase  of  the  tax  as  likely  to  prove  injurious3; 
and  it  was  also  stated  and  not  disputed,  that  "  high  wines 
manufactured  in  Cincinnati  were  at  the  time  being  shipped  by 
the  way  of  the  Mississippi  and  the  Gulf  to  New  York,  and  there 
publicly  sold,  with  all  the  contingent  expenses  of  transportation, 
waste,  interest,  and  commissions,  at  about  one-half  cent  per 
gallon  over  the  cost  of  their  production  in  the  very  district  in 
which  the  corn  grows  and  the  distillery  runs."  But  all  this 
availed  little  in  view  of  the  circumstance  that  the  President,  the 
Commissioner  of  Internal  Revenue,  and  an  active  lobby  favored 
the  increase  of  the  tax,  and  were  undisguisedly  desirous  of  the 
passage  of  the  bill  that  required  it.  Had,  however,  the  inten- 
tions and  suspicions  of  the  Secretary  of  the  Treasury,  and  the 
conclusive  evidence  of  extensive  fraud  and  conspiracy  which 
subsequently  came  into  his  possession,  been  then  made  public, 
the  increased  tax  would  unquestionably  never  have  been  author- 
ized by  Congress ;  for,  reviewing  all  the  circumstances,  it  can 
hardly  be  doubted  that  the  idea  of  the  desirability  of  an  "  in- 
crease "  was  in  the  first  instance  started  by  the  Ring ;  and  that  its 
members  subsequently  and  successfully  advocated  it,  through  a 
desire  to  make  their  work  more  profitable,  and  their  ability  to 
protect  themselves,  through  command  of  greater  resources  and 
temptations,  more  effective. 

1  Henry  L.  Dawes.  9  Ellis  H.  Roberts. 

3  See  Congressional  Record,  Feb.  17,  1875. 


OUR  EXPERIENCE   IN  TAXING  DISTILLED  SPIRITS.      227 

While  the  bill  was  under  consideration  in  the  Committee  of 
Ways  and  Means  in  the  House,  the  matter  of  making  the  pro- 
posed increase  of  tax  applicable  to  stocks  of  spirits  on  hand  again 
f  came  up  for  consideration,  and  it  was  agreed  to  recommend  that 
such  "  stocks  " — /.  i\,  in  original  packages,  estimated  as  amounting 
to  about  11,000,000  gallons— should  be  taxed  under  the  new  law 
to  the  extent  of  fifty  per  cent,  of  the  increase.  The  proposition, 
however,  as  in  all  previous  cases,  found  no  favor  with  Congress, 
and  the  bill  passing  without  any  such  retroactive  clause,  the  sum 
of  $2,200,000  was  in  consequence  at  once  legislated  into  the 
pockets  of  the  distillers.1 

The  increase  of  the  tax  was,  however,  the  last  measure  of 
success  which  the  "  Ring  "  achieved;  for,  on  the  10th  of  May  fol- 
lowing, the  Secretary  of  the  Treasury,  having  through  his  special 
methods  of  investigation  secured  evidence  sufficient  to  render 
any  further  concealment  of  his  plans  unnecessary,  commenced 
offensive  operations  by  seizing  a  large  number  of  prominent  dis- 
tilleries and  rectifying  establishments  at  the  West,  and  five  days 
later  summarily  dismissing  from  office  the  Commissioner  of  In- 
ternal Revenue.  Then  followed  in  rapid  succession  the  indict- 
ment and  arrest  of  McDonald,  the  Missouri  Supervisor;  Joyce, 
the  Special  Revenue  Agent ;  Avery,  the  former  Chief  Clerk  of 
the  Treasury  ;  Gen.  O.  A.  Babcock,  the  President's  Private  Secre- 
tary ;  Wm.  McKee,  the  proprietor  of  the  St.  Louis  Democrat; 
Maguire,  the  Revenue  Collector  at  St.  Louis;  and  a  great  number 
of  subordinate  revenue  officials  and  many  distillers  and  rectifiers. 
McDonald,  Joyce,  McKee,  and  Avery  were  tried,  convicted,  and 
sentenced  to  the  payment  of  heavy  fines  and  lengthy  terms  of 
imprisonment.  Maguire  pleaded  guilty  ;  while  Babcock,  who  was 
able  to  enlist  expert  and  able  counsel  for  his  defence,  was  ac- 

1  In  connection  with  this  matter,  the  following  incident  is  not  a  little  interesting, 
and  from  a  legislative  point  of  view  somewhat  instructive.  When  the  Committee  of 
Ways  and  Means,  in  secret  session,  agreed  to  recommend  to  the  House  that  a  provision 
taxing  stocks  on  hand  to  the  extent,  of  half  the  proposed  increase  of  rate  be  incorpo- 
rated in  the  bill,  special  care  was  taken  to  keep  the  action  of  the  committee  secret,  in 
order  to  avoid  speculative  action  on  the  part  of  distillers  and  wholesale  dealers.  But 
within  twenty-four  hours  exceptional  orders  for  stamps,  to  the  extent  of  half  a  million 
of  dollars,  came  into  the  Department,  for  the  purpose  of  taking  whiskey  out  of  bond 
and  placing  it  beyond  the  reach  of  any  prospective  provisions  for  any  additional 
taxation. 


228  PRACTICAL  ECONOMICS. 

quitted.  This  result,  in  the  minds  of  the  public,  was,  however, 
regarded  as  having  been  due  in  a  great  measure  to  an  extraordi- 
nary circular-letter  written  by  the  (then)  Attorney-General  of  the 
United  States,  Hon.  Edwards  Pierrepont,  to  the  United  States 
District-Attorneys  in  charge  of  the  case,  and  preceding  the  trial, 
to  the  purport  that  no  immunity  from  subsequent  prosecution  was 
to  be  given  to  any  guilty  parties  who  might  be  inclined  to  pur- 
chase their  safety  by  turning  State's  evidence.  The  obvious 
effect  of  this  being  to  effectually  prevent  the  Government  from 
obtaining  the  evidence  necessary  to  ensure  conviction,  Congress 
felt  compelled  to  take  cognizance  of  it,  and  by  resolution  of  the 
House  of  Represenatives  (Feb.  25th)  the  Attorney-General  was 
asked  for  an  explanation  ;  which  explanation  (when  given)  being 
regarded  as  unsatisfactory,  the  whole  matter  was  then  referred 
to  the  Judiciary  Committee  with  instructions  to  examine  and 
report.  And  this  Committee,  after  reviewing  in  severe  terms  the 
course  of  the  Attorney-General,  recommended  the  adoption  by 
the  House  of  a  resolution  to  the  effect,  that,  in  their  judgment, 
"  the  Attorney-General  should  immediately  revoke  the  instruc- 
tions covered  and  implied  "  in  his  letter,  inasmuch  as  the  position 
taken  in  it  was  in  contravention  of  "the  long-established  rule 
relating  to  the  testimony  of  accomplices  in  criminal  actions,"  and 
which  rule  "  is  necessary  to  prevent  combinations  for  criminal 
purposes,  and  greatly  aids  in  the  disclosure  of  conspiracies  to 
commit  crime."  The  trial  of  Babcock  had,  however,  terminated 
before  the  Committee  reported.  Again,  on  the  trial  of  Avery, 
Hon.  John  B.  Henderson,  formerly  a  United  States  Senator  for 
Missouri,  and  a  leading  member  of  the  St.  Louis  bar,  was  retained 
by  the  Government  to  assist  the  District-Attorney  in  the  prose- 
cution, and  made  the  closing  argument  in  its  behalf  to  the  jury. 
A  portion  of  this  speech  being  regarded  by  the  President  as  per- 
sonally offensive,  he  promptly  manifested  his  displeasure  by 
discharging  Mr.  Henderson  from  any  further  service  as  counsel 
for  the  Government. 

The  further  and  final  incidents  of  note  in  this  most  extraor- 
dinary and  disgraceful  record  may  be  briefly  summarized  by 
saying:  that  McDonald,  Avery,  McKee,  and  Maguire  were  all 
pardoned  by  the  President  (Gen.  Grant)  before  the  expiration 
of  the  terms  of  imprisonment  to  which  they  were  sentenced,  and 


V 


..-5I7IE 


OUR  EXPERIENCE  IN   TAXING  DISTILLED   SPIRITS. 


'igO^J; 


their  fines  remitted  ;  and  that  after  the  conclusion  of  the  trials, 
the  Secretary  of  the  Treasury  (Bristow)  and  the  Solicitor  of  the 
Treasury  (Wilson,  who  had  been  the  Secretary's  most  earnest 
and  active  co-operator  in  exposing  and  breaking  up  the  con- 
spiracy) resigned  and  retired  from  their  respective  offices.1 

Since  the  passage  of  the  act  of  March  3,  1875,  raising  the  tax 
on  distilled  spirits  to  90  cents  per  proof-gallon,  the  rate  to  the 
present  time  of  writing,  1885,  has  remained  unchanged.  Illicit 
distillation,  as  might  naturally  be  expected  under  the  temptations 
offered  by  such  a  rate  of  tax,  constantly  goes  on,  but  on  a  very 
small  scale  in  respect  to  quantity,  and  to  a  very  limited  extent  in 
the  Northern  and  Western  States  of  the  Union.  For  the  period 
of  seven  years,  from  1876  to  1883  inclusive,  the  experience  of  the 
Internal  Revenue  has  been  reported  as  follows:  Number  of  stills 
seized,  5,498;  officers  and  employes  killed,  36;  officers  and  em- 
ployes wounded,  61.  Of  the  397  stills  seized  in  the  year  1883,  five 
only  were  in  the  Northern  and  Western  States,  the  others 
being  mainly  in  the  thinly  settled  and  mountainous  districts  of 
the  States  of  Kentucky,  North  Carolina,  Georgia,  Tennessee,  and 
Virginia.  In  extensive  regions  in  these  States,  the  small  farmers 
grow  little  besides  corn,  and  in  the  entire  absence  of  railways,  and 
also  to  a  great  extent  of  roads,  there  is  no  way  for  them  to  bring 
their  surplus  corn  to  any  market,  except  in  the  form  of  whiskey; 
and  except  for  what  may  be  paid  them  in  cash  for  their  whiskey, 
few  farmers  handle  as  much  as  twenty  dollars  in  ready  money  in 
any  one  year.  The  result  is  that  the  inhabitant  of  these  sections 
of  the  country  feels  that  he  has  a  right  to  transform  his  corn  into 
whiskey,  and  that  the  Government  is  acting  in  a  most  tyrannical 
and  unjust  manner  in  seeking  to  prevent  it.  Hence  the  multi- 
plicity of "  moonshiners," — as  illicit  distillers  are  termed, — the  little 
rude  stills  among  the  mountains,  and  the  murder  of  the  revenue 
officials  who  attempt  to  make  arrests  and  break  up  the  business. 

1  Those  desirous  of  more  detailed  information  respecting  the  events  of  which  a 
summary  only  has  been  here  given,  are  referred  to  files  of  the  leading  newspapers  and 
reviews  of  the  United  States  for  the  year  1875,  and  the  first  half  of  the  year  1876  ; 
also  to  a  book  entitled  "  Secrets  of  the  Great  Whiskey  Ring,"  written  by  McDonald, 
and  published  in  St.  Louis  (revised  edition,  1S80).  This  book,  which  is  in  the  nature 
of  a  confession,  purports  to  give  documentary  proofs,  comprising,  fac-similes  of  confi- 
dential letters  and  telegrams  directing  the  management  of  the  Ring,  and  in  respect  t» 
most  of  its  statements  is  probably  unimpeachable. 


23O  PRACTICAL    ECONOMICS, 

The  gross  product  that  under  these  circumstances  annually  evades 
the  payment  of  the  tax  is,  however,  comparatively  inconsider- 
able. 

Regarded  from  an  economic  or  financial  stand-point,  the 
results  of  the  90-cent  (gallon)  tax,  as  compared  with  those  ob- 
tained under  the  50-  and  70-cent  rates,  are  exceedingly  interest- 
ing. Thus,  during  the  last  full  year  (1872)  under  the  50-cent 
rate,  the  tax  was  collected  on  65,145,000  proof-gallons  of  dis- 
tilled1 spirits,  which,  with  an  assumed  population  of  41,000,000, 
would  include  an  average  annual  consumption  of  about  1.50 
proof-gallons  per  capita. 

During  the  last  full  year  (1874)  of  the  70-cent  rate,  the  tax 
was  collected  on  61,145,000  gallons,  which,  with  an  assumed 
population  of  44,000,000,  would  indicate  an  average  annual  con- 
sumption of  about  1.40  proof-gallons  per  capita. 

During  the  year  1876,  the  first  of  the  90-cent  rate,  the  tax  was 
collected  on  56,442,000  gallons,  which,  with  the  then  population 
of  the  country,  would  indicate  an  average  annual  consumption  of 
about  1.23  gallons  per  capita. 

During  the  year  1880,  under  a  continuation  of  the  90-cent 
rate,  the  tax  was  collected  on  61,125,000  gallons,  which,  with  a 
then  known  population  of  50,155,000,  would  indicate  an  average 
annual  consumption  of  about  1.21  gallons  per  capita. 

The  revenues  from  spirits  for  the  years  188 1-4  are  valueless  for 
estimating  consumption ;  as  the  payment  of  taxes,  during  these 
years,  was  made  compulsory  on  large  quantities  of  spirits  in 
bond,  by  limitation  of  the  bonded  period  of  tax  exemption. 

For  1885,  the  tax  (90  cents)  was  collected  on  67,689,000 
gallons ;  but  as  large  quantities  of  spirits  were  forced  out  of  bond 
during  this  year  also,  there  is  reason  for  believing  that  the  taxes 
were  paid  on  a  much  larger  quantity  than  actually  entered  into 
consumption.  Assuming,  however,  the  correctness  of  the  official 
returns,  the  average  consumption  for  1885  would  have  been  about 
1. 16  gallons  per  capita. 

,In  these  comparisons  account  only  is  taken  of  spirits  distilled  from  materials 
other  than  fruits,  i.  e.t  grain.  The  revenue  laws  of  the  United  States,  with  a  view  of 
favoring  the  business,  have  always  discriminated,  through  lower  taxation,  in  favor 
of  spirits  distilled  from  fruits,  i.  e.,  brandies.  The  collections  from  such  products  are, 
however,  comparatively  inconsiderable,  and  in  only  one  year  (1873)  have  been  in 
excess  of  two  millions  of  dollars. 


OUR  EXPERIENCE  IN   TAXING  DISTILLED  SPIRITS.      23 1 

On  the  basis  of  these  data  an  approximate  estimate  of  the 
fiscal  productiveness  of  the  low  (50  cents)  and  high  (90  cents)  tax 
system,  becomes  possible.  Thus  during  the  year  1872,  the  tax  was 
collected  on  an  average  annual  consumption  of  at  least  1.5  gallons 
per  capita.  Had  this  rate  been  maintained,  the  quantity  available 
for  taxation  in  1885  would  have  been  87,000,000  gallons.  The 
number  of  gallons  assessed  in  1885  was  67,689,000. 

Including  the  direct  and  collateral  taxes  the  tax  rate  actually 
collected  on  distilled  spirits,  in  1872,  amounted  to  75.1  cents  per 
gallon;  which  rate,  if  collected  in  1885,  on  a  per-capita  con- 
sumption proportioned  to  that  of  1872,  would  have  afforded  a 
revenue  of  over  $65,300,000,  as  compared  with  an  actual  receipt 
from  the  same  sources,  under  the  90  cent  rate,  of  only  $66,189,000; 
— a  gain  in  revenue  obviously  insufficient  to  compensate  for  the 
advantages  which  would  have  certainly  accrued  under  the  lower 
tax  through  the  reduction  of  incentives  to  illicit  distillation,  and 
of  the  first  cost  of  spirits  for  industrial  purposes. 

In  explanation  of  an  apparent  inconsistency  between  the  fact 
that  the  Internal  Revenue  has  not  of  late  years  been  able  to 
assess  and  collect  the  tax  on  as  large  a  per-capita  production  and 
consumption  of  distilled  spirits  as  in  1870,  and  the  opinion  above 
expressed,  that  there  is  at  present  but  comparatively  little  illicit 
production  in  the  country,  it  is  to  be  said  :  that  while  nearly  all 
who  have  carefully  examined  into  this  subject  are  agreed  that 
Federal  taxation  of  distilled  spirits  has  not  (except  possibly  at 
the  outset)  affected  their  demand  for  drink,  and  that  their  con- 
sumption for  such  purpose  in  the  United  States  goes  increasing 
regularly  (if  not  in  an  equal  ratio)  with  the  increase  of  population, 
the  evidence  on  the  other  hand  is  conclusive  that  their  use  for 
economic  and  scientific  purposes  has  been  greatly  restricted  by  the 
present  high  rate  of  tax  imposed  on  their  production.  Prior  to 
the  imposition  of  any  taxes  on  spirits,  or  before  the  war,  it  is 
probable  that  33  per  cent,  at  least  of  the  whole  product  of  the 
country  was  consumed  in  the  arts  and  industries;  but  at  the 
present  time  (1885)  it  is  estimated,  by  those  well  qualified  to  form 
an  opinion,  that  not  over  10  per  cent,  of  the  total  product  is 
thus  used.  Artisans,  manufacturers,  and  pharmaceutists  who 
formerly  consumed  untaxed  alcohol  in  great  quantities,  and  to 
a  considerable  extent  also  when  the  tax  on  proof-spirits  was  50 


232  PRACTICAL    ECONOMICS. 

cents,  now  regard  its  use  under  the  present  tax  rate  as  unprofit- 
able, and  in  consequence  have  either  abandoned  their  old  meth- 
ods of  procedure  or  preparations,  or  resorted  to  the  employment 
of  cheaper  substitutes. 

The  aggregate  amount  of  revenue  received  by  the  Federal 
Government  from  all  the  taxes  which  it  has  levied  on  the  manu- 
facture and  sale  of  distilled  spirits  from  1863  to  1884  inclusive,  a 
period  of  twenty-two  years,  has  been  a  thousand  and  fifty-six 
millions  of  dollars,  or,  in  exact  figures,  $1,056,137,946.79. 

The  magnitude  of  these  results  under  the  Federal  system,  and 
the  apparent  facility  with  which  they  have  been  attained,  have 
naturally  suggested  from  time  to  time  to  the  several  States  of  the 
Union,  the  special  taxation  of  the  manufacture  and  sale  of  distilled 
spirits  within  their  own  borders,  as  a  means  of  increasing  their 
local  revenues.  That  the  several  States  have  the  right  to  impose 
non-discriminating  taxes  on  persons,  property,  and  business  within 
their  own  territorial  jurisdiction,  is  not  questioned  ;  but  the 
almost  insuperable  obstacles  in  the  way  of  the  special  taxation  by 
any  State  of  any  of  its  local  products — agricultural,  mineral,  or 
manufactured — are  :  that  to  just  the  extent  to  which  such  taxing 
increases  the  cost  (price)  of  such  State  products,  to  a  like  extent 
is  their  export  to  and  sale  in  other  States,  which  do  not  similarly 
tax,  restricted  or  prevented ;  while,  at  the  same  time,  as  no  State 
can  impose  taxes  on  importations  from  other  States  or  from 
foreign  countries,  the  imposition  of  special  taxes  on  any  of  its 
products  virtually  constitutes  bounties  for  the  importation  and 
competitive  sale  of  the  like  products  of  other  States  which  have 
not  been  subject  to  such  special  taxation.  On  the  other  hand,  to 
attempt,  with  a  view  to  obtaining  large  revenues,  to  impose  and 
collect  high  taxes  on  the  local  sale  and  consumption  of  distilled 
spirits,  was  but  to  create  undue  temptations  to  fraud  and  to 
repeat  the  experience  which  the  Federal  Government  had  proved 
to  be  so  disastrous.  To  overcome  these  difficulties  the  State  of 
Virginia,  some  years  since,  enacted  and  put  in  operation  an 
ingenious  law,  the  object  of  which  was  to  obtain  a  large  revenue 
from  taxes  on  the  sale  of  spirits  at  retail,  and  to  properly  deter- 
mine and  ensure  the  collection  by  machinery.  With  this  object,  in 
addition  to  the  payment  in  advance  of  a  prescribed  amount  for  a 
license  to  sell,  each  bar-room  keeper  or  retail  liquor-dealer  was 


OUR  EXPERIENCE  IN    TAXING  DISTILLED   SPIRITS.       233 

required  to  hire  from  the  revenue  commissioner  of  his  district  an 
"  apparatus,"  which  resembled  a  gas-meter  in  appearance,  and 
was  termed  a  "bar-room  register."  Its  operation  was  not  dis- 
similar to  that  of  the  familiar  "  bell-punch,"  or  u  indicator," 
employed  for  registering  fares  in  the  street-railway  cars  of  our 
large  cities.  The  law  further  provided,  that  each  bar-room 
keeper,  "  immediately  on  the  sale  of  each  drink  of  wine,  ardent 
spirits,  malt  liquors,  or  any  mixture  thereof,  in  the  presence  of 
the  purchaser  or  person  to  whom  it  is  delivered,  should  turn  the 
crank  of  the  proper  register  until  the  bell  has  struck  once,  and 
the  indicator  on  its  dial  has  moved  one  point  or  number  for  each 
drink  sold  by  him,"  The  registers  were  required  to  be  inspected 
monthly,  and  the  tax  imposed  was  two  and  one  half  cents  for 
each  drink  or  half-pint  of  wine  or  spirits,  and  half  a  cent  for  the 
same  quantity  of  malt  liquor.  Wild  expectations  were  indulged 
in  respect  to  the  results  of  this  system,  which  was  popularly 
termed,  from  the  inventor,  the  "  Moffat  Bell-Punch  Law  ";  and 
some  sanguine  people,  on  the  basis  of  an  estimate  of  the  average 
number  of  drinks  purchased  every  day  in  the  year  throughout  the 
State,  were  confident  that  revenue  nearly  or  quite  sufficient 
would  be  obtained  from  this  source  to  meet  all  the  requirements 
of  the  State  for  expenditures.  The  experiment  was  not,  how- 
ever, a  success.  The  introduction  of  the  "  apparatus  "  was  the 
only  novelty  in  the  law,  and,  with  the  exception  of  informers 
(who  were  allowed  one  third  of  the  fine  imposed  for  disobeying 
the  law),  and  possibly  also  the  manufacturer  of  the  indicator,  no 
one  was  particularly  interested  in  its  enforcement  ;  while  every 
regular  toper  felt  bound  to  connive  at  the  infringement  of  a 
statute,  the  immediate  influence  of  which  was  to  raise  the  cost  of 
drinking.  The  system,  after  a  brief  but  sufficient  trial,  was, 
therefore,  adandoned  ;  leaving  as  its  only  meritorious  result, 
another  illustration  of  the  prevalent  and  apparently  incurable 
delusion,  that  liquor  laws  can  be  made  different  in  principle  from 
all  other  laws ;  and  that  if  one  could  be  framed  with  sufficient 
ingenuity,  the  ordinary  characteristics  of  human  beings,  their 
instincts,  desires,  motives,  might  be  complacently  ignored/ 

1  Additional  light  on  the  causes  of  the  failure  of  the  "  Moffat  Bell-Punch  Law" 
may  be  gleaned  fron  the  following  comment  on  it,  at  the  time  of  its  repeal,  by  one  of 
the  leading  journals  of  Virginia,   TJie  (Richmond)  State  : 

"  To  say  the  least,  this  law  was  not  a  success.       The  revenue  from  it  was  fast 


234  PRACTICAL   ECONOMICS. 

CONCLUSION. 

In  concluding  this  most  curious  and  not  heretofore  fully 
related  record  of  recent  economic  experience,  the  writer  would 
ask  attention  to  what  seems  to  him  to  be  its  most  important  and 
valuable  lesson  and  moral,  and  that  is :  that  whenever  a  govern- 
ment imposes  a  tax  on  any  product  of  industry  sufficiently  great 
to  sufficiently  indemnify  and  reward  an  illicit  or  illegal  produc- 
tion of  the  same,  then  such  product  will  be  illicitly  or  illegally 
manufactured  ;  and  when  that  point  is  reached  the  losses  and 
penalties  consequent  upon  detection  and  conviction — no  matter 
how  great  may  be  the  one,  or  how  severe  the  other — will  be 
counted  in  by  the  offenders  as  a  part  of  the  necessary  expenses  of 
their  business;  and  the  business,  if  forcibly  suppressed  in  one 
locality,  will  inevitably  be  renewed  and  continued  in  some  other. 
It  is,  therefore,  a  matter  of  the  first  importance  for  every  govern- 
ment in  framing  laws  for  the  assessment  and  collection  of  taxes, 
to  seek  to  know  when  the  maximum-revenue  point  in  the  case  of 
each  tax  is  reached,  and  to  recognize  that  in  going  beyond  that 
limit  the  government  "  over-reaches  "  itself. 

But  in  an  experience  of  now  nearly  a  quarter  of  a  century  in 
making  the  manufacture  and  sale  of  distilled  spirits,  instrumen- 
talities for  collecting  revenues  for  the  support  of  the  Government, 
the  United  States,  as  represented  by  the  makers  and  adminis- 
trators of  its  laws,  has  for  the  most  part  declined  to  seek  for, 
or  profit  by,  any  such  information  ;  but,  on  the  contrary,  as 
has  been  somewhat  humorously  expressed,  "  it  has  held  out  an 
undue  temptation  to  defraud  on  the  one  hand,  and  a  writ  for 
seizure  and  indictment  on  the  other,  and  thus  equipped,  has  an- 
nounced its  readiness  to  proceed  to  business."  And  the  conse- 
quences have  become  a  part  of  the  world's  economic  history. 

growing  less,  .not  because  the  law  hindered  drinking,  but  because  it  gave  every 
opportunity  for  fraud.  Falling  only  on  those  who  were  honest  enough  to  register  their 
sales,  it  was  never  felt  by  those  who  chose  to  cheat  the  Government.  As  a  law  that 
could  be  obeyed  or  not  at  will,  it  could  never  be  effective.  Its  inquisitorial  nature 
made  it  repulsive,  and  the  State  is  fortunate  to  be  rid  of  it." 


INFLUENCE    OF    THE    PRODUCTION    AND    DISTRI- 
BUTION   OF   WEALTH    ON   SOCIAL 
DEVELOPMENT.1 

LADIES  and  Gentlemen: — In  welcoming  you  to  this  first 
meeting  in  the  States  of  the  Northwest,  of  the  American 
Association  for  the  Promotion  of  Social  Science,  with  the 
address  which  ancient  custom  and  a  recognition  of  the  fitness  of 
things  seem  to  require  should  be  made  by  the  presiding  officer 
on 'such  occasions,  I  propose  to  ask  your  attention  to  a  line  of 
thought  touching  the  agencies  which,  perhaps  more  than  any 
other,  are  contributing  to  the  moulding  and  development  of 
society — namely,  the  production  or  accumulation,  and  the  distri- 
bution, of  that  which  we  call  wealth,  or  capital ;  meaning  thereby 
abundance  of  all  those  things  which  contribute  to  our  well-being, 
comfort,  and  happiness. 

And,  in  so  doing,  the  first  point  I  would  ask  you  to  consider 
is,  that,  out  of  all  of  his  present  accumulations  of  wealth,  man 
has  never  created  any  thing.  What  Nature  gives  he  appropriates; 
and  in  this  appropriation,  or  collection  of  natural  spontaneous 
products,  consists  the  original  method  of  earning  a  living, — the 
method  still  mainly  depended  on  by  all  uncivilized  and  barbarous 
people.  The  first  advance  upon  this  method  is  to  make  provision 
for  the  future  by  carrying  over  supplies  from  seasons  of  abundance 
to  seasons  of  scarcity,  or  in  learning  the  necessity  and  benefits  of 
accumulation.  But,  in  all  this,  man  does  nothing  more  than  the 
animals,  who,  following  what  we  term  the  promptings  of  instinct, 
gather  and  lay  up  stores  in  the  summer  for  consumption  in  the 
winter;  and  he  lifts  himself  above  the  animals  only  when,  and 
proportionally  so,  he  learns  that  he  can  tempt  Nature  to  give 
more  abundantly,  by  bringing  various  kinds  of  matter  and  various 

1  Annual  address  as  President  of  the  American  Social-Science*  Association,  Detroit, 
May,  1S75. 

235 


236  PRACTICAL  ECONOMICS. 

forces  together,  or  into  such  relations  as  will  enable  them  to  act 
upon  each  other  under  the  most  favorable  circumstances.  And 
it  is  in  the  attainment  and  application  of  this  knowledge  of  how 
to  tempt  Nature  to  give, — or,  as  we  term  it,  "to  produce"  using 
to  express  our  meaning  most  correctly  a  word  which  signifies  "  to 
lead  forth"  and  not  "  to  create" — that  the  distinction  is  to  be 
found  between  the  civilized  and  uncivilized  methods  of  earning  a 
living;  man  in  the  one  case  being  mainly  a  collector,  and  in  the 
other  a  "  drawer-out"  or  producer.  And  herein,  furthermore, 
is  to  be  found  the  characteristic,  or,  as  Chevalier  the  French 
economist  expresses  it,  M  the  mystery  and  marvel,  of  our  modern 
civilization — namely,  that,  through  the  attainment  and  exercise  of 
increased  knowledge  and  experience,  we  have  so  far  come  to 
know  the  properties  of  matter  and  the  forces  of  Nature,  as  to 
enable  us  to  compel  the  two  to  work  in  unison  for  our  benefit 
with  continually  increasing  effectiveness ;  and  so  afford  to  us 
from  generation  to  generation  a  continually  increasing  product  of 
abundance,  with  a  continually  diminishing  necessity  for  the  exer- 
cise of  physical  labor."  And,  as  some  evidence  of  the  degree  of 
success  thus  far  attained  to  in  this  direction,  we  have  the  simple 
statement, — yet  of  all  things  the  one  most  marvellous  in  our 
experience, — that  at  the  present  time,  in  Great  Britain  alone,  the 
force  annually  evolved  through  the  combustion  of  coal,  and  ap- 
plied to  the  performance  of  mechanical  work,  is  directly  equiva- 
lent to  the  muscular  power  of  at  least  one  hundred  millions  of 
men ;  or,  to  state  the  case  differently,  the  result  attained  to  is  the 
same  as  if  the  laboring  population  of  Great  Britain  had  been  in- 
creased twelvefold,  without  necessitating  any  material  increase 
in  production  for  the  support  and  sustenance  of  this  additional 
number. 

Another  illustration  to  the  same  effect,  but  one  more  recent 
and  less  familiar,  is  afforded  by  the  construction  and  operation  of 
the  Suez  Canal.  Thus,  a  few  years  ago,  a  swift  voyage  from 
England  to  Calcutta,  via  the  Cape  of  Good  Hope,  was  from  a 
hundred  and  ten  to  a  hundred  and  twenty  days.  Now  steamers 
by  way  of  the  canal  make  the  same  voyage  in  about  thirty  days. 
Here,  then,  is  a  diminution  of  seventy-five  per  cent,  on  the  enor- 
mous stocks  of  goods  continually  required  to  be  held  unused, 
involving  continued  risk  of  depreciation,  loss  of  interest,  and  cost 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  237 

of  insurance,  to  meet  the  requirements  of  mere  transit.  Add  to 
which  the  fact,  that  the  improvements  in  marine  engines  enable 
these  vessels  to  work  with  about  one  tenth  less  coal,  and  there- 
fore carry  proportionally  more  cargo  than  they  could  seven  or 
eight  years  before  the  canal  was  opened  ;  and  that  the  construc- 
tion of  the  telegraph  between  England  and  India  enables  dealers 
and  consumers  also  to  regulate  their  supplies  without  carrying 
excessive  stocks  of  commodities,  and  so  keeps  prices  steady,  and 
discourages  speculation, — and  we  have  in  this  single  department 
of  trade  and  commerce  a  saving  and  release  of  capital  and  labor 
for  other  purposes  and  employments  that  amounts  to  a  revolution. 
What  is  yet  to  be  accomplished  in  the  way  of  increasing  the 
proportion  of  product  to  manual  labor,  time  alone  can  show ;  but 
there  is  no  evidence  at  present  to  indicate  that  we  are  approach- 
ing any  limitation  to  further  progress  in  this  direction.  A  writer 
in  The  London  Economist  in  1873,  evidently  most  conversant  with 
his  subject,  claimed  that  the  industry  of  the  population  of  Great 
Britain  at  that  time,  taken  man  for  man,  was  nearly  twice  as  pro- 
ductive as  it  was  in  1850;  and  I  do  not  think  that  any  one  can 
review  the  industrial  experience  of  the  United  States  as  a  whole 
since  i860,  but  must  feel  satisfied  that  our  average  gain  in  the 
power  of  production  during  that  time,  and  in  spite  of  the  war,  has 
not  been  less  than  from  fifteen  to  twenty  per  cent.  And,  if  this 
statement  should  seem  to  any  to  be  exaggerated,  it  is  well  to  call 
to  mind  that  it  is  mainly  within  this  period  that  the  very  great 
improvements  in  machinery  adapted  to  agriculture  have  been 
brought  into  general  use :  that  whereas  a  few  years  ago  men  on 
the  great  fields  of  the  West  cut  grain  with  sickles  and  with 
cradles,  toiling  from  early  morn  to  dewy  eve  in  the  hottest  period 
of  the  year,  the  same  work  may  be  done  now  almost  as  a  matter 
of  recreation  ;  the  director  of  a  mechanical  reaper  entering  the 
field  behind  a  pair  of  horses,  with  gloves  on  his  hands,  and  an 
umbrella  over  his  head,  and  in  this  style  finishing  the  work  in  a 
fraction  of  the  time  which  many  men  would  formerly  have  re. 
quired,  and  in  a  manner  much  more  satisfactory.1     I  would  also 

1  The  following  illustration  is  even  more  remarkable  and  interesting.  Forty  years 
ago  or  less,  Indian  corn  was  shelled  by  a  man  sitting  astride  the  handle  of  a  shovel  and 
scraping  the  ears  against  the  edge,  or  using  the  cob  of  one  ear  to  shell  the  corn  from 
another.  A  likely  man  could  shell  in  this  way  about  five  bushels  in  ten  hours,  and  re- 
ceived one  tenth  of  the  corn  he  shelled  for  his  labor.    Up  to  1878,  378  patents  had  been 


238  PRACTICAL   ECONOMICS. 

recall  to  you  that,  in  the  manufacture  of  boots  and  shoes,  three 
men  now,  with  the  aid  of  machinery,  can  produce  as  much  in  a 
given  time  as  six  men  unaided  could  have  done  in  i860;  that  we 
have  forty  thousand  more  miles  of  railroad  now  (1 875)1  than  we  then 
had  to  assist  us  in  the  work  of  exchange  and  distribution ;  that  we 
can  send  our  telegrams  now  for  less  than  one  half  what  it  actually 
cost  to  do  the  work  in  1866  ;  and  finally,  taking  the  Pennsylvania 
Central  Railroad  as  a  type,  that  we  can  send  our  freight  by  rail- 
road at  an  average  of  less  than  a  cent  per  ton  per  mile,  as  com- 
pared with  a  charge  of  2.41  on  the  same  road  for  the  same  service 
in  1864. 

And,  as  a  curious  instance  of  this  continuous  progress,  it  may 
be  here  also  noted,  that  the  abandonment  of  large  quantities  of 
costly  machinery  in  most  branches  of  staple  manufactures,  and  its 
replacement  by  new,  is  periodically  rendered  a  matter  of  absolute 
economical  necessity,  in  order  to  produce  more  perfectly  and 
cheaply,  and  at  the  same  time  avoid  the  destruction  of  a  much 
greater  amount  of  capital  by  industrial  rivalry ;  thus  strikingly 
illustrating  an  economic  principle  to  which  attention  was,  I  think, 
first  called  by  my  friend  Mr.  Atkinson  of  Boston — that  the  abso- 
lute destruction  of  what  has  once  been  wealth  often  marks  a 
greater  step  in  the  progress  of  civilization  than  any  great  increase 
in  material  accumulation  ;  the  breaking  up  and  destruction  of  the 
old  machinery,  and  its  replacement  by  new,  in  the  cases  referred 
to,  being  the  sole  conditions  under  which  a  diminution  of  the  cost 
of  production  could  be  effected,  and  the  abundance  of  product 
be  made  greater. 

We  are  often  accustomed  to  speak  of,  and  perhaps  look  for- 
ward to,  a  period  which  we  call  "  millennial,"  which  is  to  be  char- 
acterized in  particular  by  an  absence  of  want  of  all  those  things 
which  minister  to  our  material  comfort  and  happiness.    But  when 

issued  in  the  United  States  for  corn-shellers  ;  and  the  machinery  for  this  purpose  has 
been  so  perfected,  that  two  men,  with  a  machine  driven  by  steam-  or  horse-power,  can 
easily  shell  1,500  bushels  a  day,  the  cobs  being  carried  off  into  a  pile  by  themselves  or 
into  a  wagon,  and  the  corn  run  into  sacks  or  wagons,  to  be  driven  off  in  bulk.  The 
corn  crop  of  the  United  States  for  the  year  1880  approximated  1,800,000,000  bushels. 
Tt  would  have  required  the  entire  population  of  the  country  at  that  time — every  man, 
woman,  and  child  of  its  fifty  millions  of  people — to  have  spent  the  entire  six  working 
days  of  a  week,  and  a  part  of  Sunday,  to  have  shelled  the  crop  of  that  year  by  the  old 
process. 

1  80,000  more  in  1885. 


PRODUCTION  AND   DISTRIBUTION  OF  WEALTH.  239 

that  period  arrives,  if  it  ever  does,  one  of  two  things  must  take 
place  :  either  man  must  so  far  change  his  nature  as  to  be  able  to 
exist  in  comfort  without  a  supply  of  all  those  objects  which  are 
comprised  under  the  general  terms,  food,  clothing,  shelter,  and  lux- 
uries] or  else  the  forces  of  nature  must  be  so  much  further  sub- 
ordinated and  brought  under  our  control  as  to  do  all  our  work  for 
us,  instead  of,  as  now,  doing  but  a  part, — and  thus  become,  in  all 
respects,  our  all-sufficient  ministers  and  servants. 

But,  when  that  time  comes,  then  all  material  wealth,  as  we 
ordinarily  use  the  term,  must  disappear ;  for  that  only  is 
wealth  which  has  exchangeable  value,  and  that  only  has  exchange- 
able value  which  is  desired.  But  we  can  neither  value  nor  desire 
that  which,  like  the  air,  is  at  all  times  given  in  excess  of  any  pos- 
sible use  or  necessity. 

But,  fanciful  as  may  be  this  speculation,  it  is  nevertheless  a 
most  interesting  and  suggestive  circumstance,  that  all  of  our  true 
material  progress  constantly  points  in  this  same  direction;  inas- 
much as  the  great  result  of  every  new  invention  or  discovery  in 
economic  processes  is  to  eliminate  or  discharge  value;  making 
those  things  cheap  which  were  before  dear,  and  bringing  within 
the  reach  and  use  of  all  what  before  were  for  the  exclusive  use  and 
enjoyment  of  the  few.  Thus,  in  11 70,  Thomas  A  Becket  was. 
counted  extravagant  because  he  had  his  parlor  strewed  every  day 
with  clean  rushes ;  and,  four  hundred  years  later,  cloth  was  so 
scarce  that  Shakespeare  makes  Falstaff's  shirts  cost  him  four  shil- 
lings per  ell.  But  few  are  so  poor  nowadays  as  not  to  be  able  to 
afford  some  sort  of  a  carpet  for  their  parlor ;  and,  making  al- 
lowance for  the  purchasing  power  of  money  at  the  different 
epochs,  Falstaff's  four  shillings  would  now  give  him  near  forty 
times  the  same  quantity. 

Again  :  Sir  Henry  Bracton,  who  was  Lord  Chief  Justice  of 
England  in  the  time  of  Henry  III.,  wrote,  in  the  way  of  legal 
illustration,  that  if  a  man  living  in  Oxford  engage  to  pay  money 
the  same  day  in  London,  a  distance  of  fifty-four  miles,  he  shall  be 
discharged  from  his  contract  by  reason  of  his  undertaking  to  do  a 
physical  impossibility.  But  to-day,  what  Bracton  regarded  as  im- 
possible can  be  readily  accomplished  in  from  sixty  to  eighty 
minutes. 

That  this  wonderful  and  continued  increase  in  the  gross  prod- 


24O  PRACTICAL  ECONOMICS. 

uct  of  every  department  of  human  industry  and  enterprise  has 
been  also  attended  with  a  general  rise  in  the  standard  of  comfort, 
leisure,  and  enjoyment  available  everywhere  to  the  masses,  is 
sufficiently  proved  by  not  only  the  most  superficial  of  observation, 
but  also  by  a  great  variety  of  statistics,  which,  although  not  as 
yet  in  any  degree  formulated  or  referred  to  an  average,  are 
nevertheless  exceedingly  interesting. 

Thus,  for  example,  the  British  commercial  reports  indicate 
that  the  ability  of  the  populations  of  Russia  and  of  Germany  to 
consume  cotton  has  at  least  doubled  since  1851;  that  in  Swe- 
den the  increase  has  been  fourfold  ;  and,  in  Paraguay,  fivefold. 
And  not  merely  has  the  consumption  of  cotton  cloth  increased  in 
near  and  remote  regions,  but  the  ratio  of  absorption  among  the 
working  classes  of  Europe,  of  articles  which  a  generation  ago  were 
luxuries  to  them,  has  also  been  most  rapid  and  remarkable  ;  the 
ratio  of  increase  having  been  most  marked  in  the  average  per 
capita  consumption  of  meats,  breadstuff's,  tea,  sugar,  coffee,  cocoa, 
wines,  and  spirits.1 

But,  gratifying  as  these  evidences  of  increasing  abundance  cer- 
tainly are,  the  cry  of  the  poor,  at  least  to  the  superficial  observer, 
seems  not  less  loud,  and  the  difficulties  of  earning  a  living,  or  of 
getting  ahead  in  the  world,  seem  not  less  patent  than  they  have 
always  been  ;  while  the  discontent  with  the  inequalities  of  social 
condition  are  certainly  more  strikingly  manifested  than  at  any 
former  period.  To  understand  fully  the  origin  of  this  social  para- 
dox, is  to  presuppose  a  full  understanding  of  the  whole  domain  of 
social  science,  or  of  the  laws  and  phenomena  involved  in  all  socie- 
tary  relations ;  a  degree  and  comprehensiveness  of  knowledge 
which  it  is  safe  to  affirm  has  been  attained  by  no  man.  But  there 
is,  at  the  same  time,  a  record  of  experience  indicating  the  duties 
incumbent  on  society  in  respect  to  some  of  these  matters,  which 
cannot  too  often  be  pressed  upon  the  public  attention. 

1  Comparing  1883  with  1840,  the  increase  in  the  consumption  per  head  of  various 
articles  of  imported  food  by  the  population  of  Great  Britain,  has  been  as  follows  : 

Sugar  from  15  to  63  lbs.;  tea,  1.22  to  4.59 ;  butter,  1  to  7  ;  bacon  and  hams,  1  to 
11  ;  wheat  and  wheat  flour,  42^  to  250  ;  cheese,  1  to  si  ;  rice,  1  to  I2|.  Of  tobacco, 
the  increased  consumption  per  head  has  been  from  0.86  lb.  to  1.43  lb.;  and  of  spirits 
from  0.97  to  1.09  gall.  During  the  same  period,  the  decline  in  prices  has  been  in  the 
case  of  sugar  from  gd.  to  2d.  cts.  per  lb.  ;  of  tea,  from  $s.  to  2s.  per  pound  ;  and  of 
coffee,  from  2s.  to  is.  per  pound. 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  24I 

In  the  first  stage  of  society,  property  can  hardly  be  said  to  ex- 
ist at  all,  or  it  exists  in  common.  In  the  second  stage,  individual 
rights  appear;  but  property  is  to  a  great  extent  held  and  trans- 
ferred by  force,  and  the  generally  accepted  principle  governing 
its  distribution  is,  that  might  confers  right.  As  society  has  pro- 
gressed, however,  the  reign  of  violence  and  lawlessness  has  gradu- 
ally diminished,  until  now  the  acquisition  and  retention  of  property 
has  come  to  depend  on  superiority  of  intellect,  quickness  of  per- 
ception, skill  in  adaptation, — the  cunning  and  the  quick  being 
arrayed  against  the  ignorant  and  the  slow, — while  the  principle 
which  has  come  to  be  the  generally  accepted  basis  of  all  com- 
mercial, industrial,  and  financial  transactions,  is  succinctly  ex- 
pressed by  the  coarse  and  selfish  proverb:  "  Every  man  for  liimsclf, 
and  the  Devil  take  the  hinder  most."  And  if  we  consider  these 
terms  as  symbolical,  and  for  the  word  "  Devil"  substitute  absence 
of  abundance — want,  misery,  and  privation  ;  and  for  the  word 
"  hindermost"  the  masses,  who  constitute  the  bulk  of  every  densely 
populated  community, — then  it  must  be  admitted,  that  the  Devil 
thus  far  has  been  eminently  successful.  But  the  governing  and 
controlling  influences  of  society — meaning  thereby  the  rich,  the 
well-to-do,  and  most-intelligent  classes — have  for  a  considerable 
time  found  out  one  thing  of  importance,  and  are  beginning  to  find 
out  another  thing  of  even  greater  significance. 

The  thing  which  they  have  found  out  is,  that  it  is  not  for  the 
interest  of  any  portion  of  society,  regarded  simply  from  the  point 
of  view  of  individual  selfishness,  and  not  in  accordance  with  the 
religion  of  Christ  and  humanity,  to  allow  the  Devil  to  take  any- 
where, or  to  any  extent,  the  hindermost ;  and  the  thing  which  they 
are  beginning  to  find  out  is,  that  the  hindermost,  who  constitute, 
in  this  struggle  for  the  acquirement  and  retention  of  property,  the 
masses,  are  becoming  fast  conscious  of  their  power  and  influence, 
and  are  determined  of  themselves,  that  they  will  not,  if  they  can 
help  it,  be  captured  by  this  devil  of  civilization  ;  and,  if  obliged 
to  succumb  to  h-im,  may,  like  the  communists  of  Paris,  endeavor 
to  draw  down  with  them  the  whole  fabric  of  society  into  one  com- 
mon vortex  of  destruction. 

Out  of  the  first  of  these  discoveries  have  come  schools,  hos- 
pitals, churches,  sanitary  and  social  reforms,  the  spirit  and  the 
power  of  charity,  and   all   brotherly  kindness ;  out  of  the  second, 


242  PRACTICAL   ECONOMICS. 

strikes,  trades-unions,  the  crystallizing  antagonism  of  labor  against 
capital,  the  spirit  and  the  teachings  of  socialism,  the  practice  of 
communism. 

It  took  society  a  good  while  to  make  the  first  discovery ;  but 
it  has  been  forced  upon  it  through  bitter  and  costly  experience. 
There  was  probably  no  less  of  kindness  of  heart  five  hundred 
years  ago  among  individuals  than  now,  no  less  of  natural  sympathy 
with  the  poor,  no  less  of  individual  religious  zeal  to  do  as  we  would 
be  done  by.  But  society  certainly  did  not  act  as  now  in  respect 
to  those  things  which  society  only  can  properly  control  and  regu- 
late ;  as,  for  example,  sanitary  reform,  general  education,  protec- 
tion of  private  rights,  and  the  like.  And  for  such  neglect  society 
paid  the  penalty ;  for,  when  the  black-death  and  the  plague  came, 
they  were  no  respecters  of  persons,  and  the  rich  in  common  with 
the  poor  went  down  to  the  slaughter.  But  when  the  well-to-do 
classes  of  society  found  out  that  these  foes  had  their  origin  in 
want  of  drainage,  and  especially  in  lack  of  ventilation  and  cleanli- 
ness among  the  poor,  and  began  to  move  in  the  matter,  and  pro- 
vide remedies,  then  the  black-death  and  the  plague  abated,  and 
finally  disappeared  altogether. 

During  the  reign  of  Henry  VIII.,  seventy-two  thousand 
thieves  are  said  to  have  been  hanged  in  England  alone;  which,  if 
true,  would  indicate  that  "  about  one  man  in  ten,"  during  the 
reign,  which  extended  over  two  generations,  was,  to  use  the 
words  of  the  old  historian,  "  devoured  and  eaten  up  by  the 
gallows."  '  But  society  has  now  found  out  that  hanging  is  one 
of  the  worst  possible  uses  to  which  a  man  can  be  put  ;  and 
that  it  is  a  great  deal  cheaper  to  prevent  than  to  punish,  to 
incur  effort  and  expenditure  to  save  the  inefficient  and  the 
criminal  from  becoming  such,  rather  than  to  save  society  from 
them  after  they  have  once  become  so ;  and  that,  of  one  of 
these  two  courses,  society  has  got  to  take  its  choice.  Further- 
more, as  showing  how  social-science  investigations  are  taking 
propositions  of  this  character  out  of  the  domain  of  philan- 
thropic theory,  and  making  them  practical  matter-of-fact  dem- 
onstrations, I  submit  to  you  the  following  illustrations. 

1  Mr.  Froude,  while  regarding  this  statement  as  wholly  unwarranted,  nevertheless 
admits,  that  the  English  criminal  law  of  that  period  "was  in  its  letter  one  of  the  most 
severe  in  Europe";  and  that,  "  in  the  absence  of  graduated  punishment,  there  was 
but  one  step  to  the  gallows  from  the  lash  and  the  branding-iron." 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  243 

Thus  it  has  been  estimated  in  England,  that  the  ordinary  ex- 
pense of  bringing  up  a  child  from  infancy  to  fourteen,  in  the  best- 
managed  public  institutions  or  asylums,  cannot  be  put  down  at 
less  than  4s.  6d.,  or  somewhat  over  a  dollar  (gold),  per  week  ;  and 
for  the  United  States  it  is  undoubtedly  much  greater.  But 
taking  the  minimum  sum  as  the  basis  of  estimate,  and  allowing 
nothing  for  any  outlay  for  education  or  amusement,  the  cost  at 
fifteen  would  have  amounted  without  interest  to  about  eight 
hundred  dollars ;  and  at  eighteen,  allowing  for  all  expenditures 
and  for  interest,  each  individual  may  be  regarded  as  an  invest- 
ment by  society  of  at  least  fifteen  hundred  dollars  of  capital  econ- 
omized for  production. 

Now,  if  from  this  period  the  individual  fails  to  fully  earn  his 
own  living,  society  loses  not  only  the  amount  expended  for  his 
bringing-up,  but  other  persons  must  be  taxed  on  their  labor  and 
their  capital  to  provide  for  his  future  support  and  maintenance  ; 
so  that  the  general  stock  of  abundance  at  the  disposal  of  society 
is  not  increased,  but  diminished.  If  the  individual  turns  pauper 
or  mendicant,  and  does  nothing  whatever  for  his  own  support, 
the  cost  to  society  will  be  greater,  though  differently  apportioned. 
If  he  turns  thief  or  criminal,  he  will  be  supported  even  yet  more 
expensively  by  society  ;  for  he  will  be  maintained  by  plunder  or 
in  prison.  But  in  whatever  condition  he  may  live,  either  idle  or 
vicious,  in  prison  or  out  of  prison,  the  loss  incurred  by  the  com- 
munity for  each  such  individual  for  his  life,  which,  after  the 
attainment  of  fourteen  years,  is  likely  to  continue  until  forty,  can- 
not be  less  in  the  United  States  than  five  thousand  dollars  ;  a  loss 
in  Massachusetts  alone,  in  which  State  at  least  one  in  fourteen  of 
her  entire  population  are  paupers,  criminals,  or  needlessly  idle 
and  dependent,  which  would  be  equivalent  to  an  unproductive  ex- 
penditure of  over  five  hundred  millions  of  capital — the  results  of 
some  other  person's  labor — for  each  and  every  generation  ' 

Another  illustration  to  the  same  effect,  drawn  more  directly 
from  the  domain  of  actual  fact,  and  one  of  the  most  remarkable 
ever  placed  upon  record,  has  been  brought  to  the  attention  of  the 
public  by  members  of  this  association, — Dr.  Harris  and  Mr.  R.  L. 
Dugdale  of  New  York, — namely,  the  history  of  a  female  pauper 

1  For  this  illustration,  I  am  indebted  to  the  address  of  Mr.  Edwin  Chadwick,  C.B., 
at  the  opening  of  the  meeting  of  the  British  Association  for  the  Promotion  of  Social 
Science,  1869-70. 


244  PRACTICAL  ECONOMICS. 

child,  who  some  eighty  years  ago,  abandoned  as  an  outcast  in  one 
of  the  interior  towns  of  New  York,  and  allowed  by  society  to  re- 
main an  outcast,  has  repaid  to  society  its  neglect  by  becoming 
the  mother  of  a  long  line  of  criminals,  paupers,  prostitutes,  drunk- 
ards, and  lunatics ;  entailing  upon  the  county  of  her  residence 
alone  an  expense  of  over  one  hundred  thousand  dollars,  and  upon 
society  at  large  an  estimated  cost  of  over  one  million  of  dollars ; 
included  under  which  last  head,  is  an  item  of  twenty-five  thou- 
sand dollars  for  the  simple  prosecutions  and  trials  of  one  hundred 
and  twenty  criminals  and  offenders,  who  received  as  the  result  an 
aggregate  of  one  hundred  and  forty  years'  imprisonment.1 
./  And  thus  it  is,  that  reasoning  from  a  purely  economic  point  of 
view,  and  leaving  all  moral  and  religious  conditions  out  of  sight, 
we  arrive  at  an  absolute  demonstration,  that  the  very  best  thing 
society  can  do  to  promote  its  material  interests,  is  to  so  far 
abandon  its  old  principle  of  "  each  man  for  himself"  that  each 
man  shall  concern  himself  with  the  welfare  of  his  neighbors  and 
fellow-citizens  to  the  extent  at  least  of  seeing  that  the  Devil  be 
nowhere  permitted  to  take  even  the  humblest  and  weakest  of  the 
hindermost.  By  many,  perhaps  by  a  majority  of  the  community, 
the  Association  for  the  Promotion  of  Social  Science  is  undoubt- 
edly looked  upon  as  an  association  of  doctrinaires ;  clever  men 
naturally,  but  at  the  same  time  men  of  seclusion  and  of  study, 
unacquainted  with  the  details  of  practical  life,  who  like  to  meet 

1  Of  the  descendants  of  this  pauper  child  and  her  sisters,  709  have  been  accurate- 
ly tabulated  ;  while  researches  by  Mr.  Dugdale  indicate  that  the  total  aggregate  of 
their  descendants  reach  the  large  number  of  1 ,200  persons,  living  and  deod. 

"  Of  the  709,  91  are  known  to  be  illegitimate,  and  368  legitimate,  leaving  250  un- 
known as  to  birth.  128  are  known  to  be  prostitutes  ;  18  kept  houses  of  ill-fame  ;  and 
67  were  diseased,  and  therefore  cared  for  by  the  public.  Only  22  ever  acquired  prop- 
erty, and  eight  of  these  lost  what  they  had  gained  ;  172  received  out-door  relief  during 
an  aggregate  number  of  734  years  ;  64  were  in  the  almshouse  of  the  county,  and  spent 
there  an  aggregate  number  of  96  years  ;  76  were  publicly  recorded  as  criminals. 

*-'  The  crimes  of  the  females  were  licentiousness,  and  those  of  the  males  violence 
and  theft.  But  the  record  quoted  is  merely  their  public  history  of  criminality,  which 
is  necessarily  very  imperfect.  Great  numbers  of  offences  of  this  wretched  family  were 
never  entered  on  any  court  records  ;  and  hundreds  were  never  brought  to  trial. 
Another  appalling  feature  in  this  history  of  criminal  inheritance,  is  the  disease  spread 
through  the  country  by  these  vagrant  children,  and  the  consequent  lunacy,  idiocy, 
epilepsy,  and  final  weakness  of  body  and  mind,  which  belongs  to  inherited  pauperism, 
transmitted  to  so  many  human  beings." — Report  of  Children  s  Aid  Society,  New 
York,  1875.  .. 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  245 

together  periodically,  hear  themselves  talk,  and  see  their  names 
appended  to  long  articles  in  the  magazines  and  newspapers.  To 
any  such  I  would  commend,  for  instruction  and  conversion,  a 
typical  illustration  of  social-science  work,  as  embodied  in  a  paper, 
by  Dr.  W.  ,  E.  Boardman  of  Boston,  recently  published  by  the 
State  Board  of  Health  of  Massachusetts.  In  this  paper  it  is 
shown  that  the  rate  of  mortality  in  Massachusetts — twenty  in  a 
thousand — is  higher  than  in  most  of  the  States  of  the  Union  ; 
that  it  compares  quite  unfavorably  with  many  of  the  larger  cities 
of  Europe,  that  it  tends  to  increase  rather  than  diminish,  and 
more  especially  that  there  is  an  increasing  amount  of  death  and 
sickness  from  causes  which  are  known  to  be  avoidable  ;  also,  that 
there  is  every  reason  to  suppose,  that  by  encouraging  the  study 
and  following  out  the  teachings  of  sanitary  science,  the  death  rate 
of  the  State  can  be  speedily  reduced  from  twenty  to  fifteen  per 
thousand  ;  and  that,  in  case  this  is  done,  the  saving  in  the 
cost  of  sickness  and  disability  to  the  working  classes  alone  of  the 
State  will  not  be  less  than  three  millions  of  dollars  per  annum. 
Now,  if  the  man  who  makes  two  blades  of  grass  grow  where  but 
one  grew  before,  is  a  public  benefactor,  how  much  more  so  is  the 
individual  who,  by  the  patient  gathering  and  study  of  statistics 
like  these,  convinces  a  community  of  a  danger  in  respect  to  which 
it  would  otherwise  be  long  ignorant  ;  and  then,  as  the  result  of 
such  conviction,  initiates  a  reform  which  not  only  greatly  dimin- 
ishes the  aggregate  of  human  suffering,  but  also  greatly  increases 
the  aggregate  of  material  abundance  ?  Nay,  further,  can  any  soil 
be  cultivated,  can  any  work  be  done,  likely  to  yield  so  large 
fruition,  so  many  blades  bearing  ears  with  full  corn  in  the  ear,  as 
this  work  of  the  so-called  doctrinaires  ? 

And  there  is  yet  one  other  thing  which  society  is  also  begin- 
ning to  find  out ;  and  that  is,  that  all  these  questions  relating  to 
the  production  and  distribution  of  wealth,  and  the  avoidance  on 
the  part  of  society  of  waste,  and  the  economizing  of  expenditure, 
affect  an  infinitely  higher  class  of  interests  than  those  measurable 
by  dollars  and  cents ;  and  that  the  laws  underlying  and  control- 
ling economic  progress  are  either  identical  with  the  laws  underly- 
ing and  controlling  intellectual,  moral,  and  religious  progress,  or 
at  least  are  so  far  similar  and  closely  connected  as  to  be  mutually 
interdependent.     And  we  hold  furthermore,  that  it  is  mainly  from 


246  PRACTICAL  ECONOMICS. 

a  lack  of  perception  and  appreciation  of  this  truth,  especially  by 
those  to  whom  the  mission  of  making  men  better  is  particularly 
intrusted,  that  so  much  of  the  work  undertaken  in  these  latter 
days  by  philanthropic  and  religious  associations  has  been  like 
seed  sown  upon  stony  ground,  productive  of  but  little  benefit. 

"  The  study  and  investigation  of  these  questions  of  taxation, 
currency,  and  the  production  and  distribution  of  wealth,"  said  one 
of  our  best-known  philanthropists  lately,  "  are  all  very  well,  and 
undoubtedly  most  important ;  but  somehow  they  do  not  interest 
me.  They  seem  to  me  to  be  wholly  material,  while  the  great 
thing,  in  my  opinion,  to  be  worked  for  on  behalf  of  society,  is  the 
attainment  of  a  larger  life." 

Now,  as  to  the  ultimate  issue  and  end  of  all  our  effort,  I  fully 
agree,  a  larger  life  is  the  one  thing  essential.  It  is  the  consumma- 
tion of  all  social  progress,  the  crowning  glory  of  all  Christian  civili- 
zation, the  aspiration  of  a  future  state  of  existence.  But  on  this 
earth,  and  while  we  continue  in  the  flesh,  irt  order  that  there  may 
be  a  larger  life,  there  must  be  an  exemption  from  such  servitude  of 
toil  as  precludes  leisure  ;  and,  in  order  that  there  may  be  more 
leisure  with  less  want,  there  must  be  a  greater  abundance  ;  and, 
in  order  that  there  can  be  greater  abundance,  there  must  be  larger 
production,  more  economical  using,  and  a  more  equitable  distribu- 
tion. So  that  instead  of  there  being  any  real  or  fancied  antago- 
nism, or  diversity  of  interest,  between  the  work  of  investigating  and 
determining  the  laws  which  govern  the  production  and  distribu- 
tion of  wealth,  and  the  business  of  calling  men  to  a  larger  and  a 
higher  life,  the  former,  as  society  is  at  present  constituted,  must 
be  the  forerunner  and  coadjutor  of  the  latter ;  or  the  labor  of  the 
latter,  as  has  been  too  often  the  case,  will  be  labor  in  vain. 

When  Van  der  Kempt,  a  Dutch  missionary,  first  entered  upon 
his  work  in  South  Africa,  he  devoted  himself  in  the  outset  to  the 
labor  of  reconstructing  and  improving  the  dwellings  of  the  na- 
tives ;  and  for  this  purpose  followed  for  a  time  the  business  of 
the  brickmaker,  the  mason,  and  the  carpenter.  When  taken  to 
task  for  doing  these  things,  rather  than  devoting  his  whole  time 
to  the  preaching  of  the  gospel,  he  is  said  to  have  made  answer 
substantially  as  follows :  that  while  he  had  no  doubt  that  the 
Spirit  of  God  would  enter  a  brush  hut  with  a  mud  floor,  and 
dwell  therein,  he  felt  equally  certain  that  it  would  come  more 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  2tf 

readily  into  a  house  with  a  tiled  roof,  dry  floor,  and  glazed  win- 
dows; and,  when  there,  would  be  more  likely  to  abide  perma- 
nently. And  he  was  right ;  for  the  reason  that  it  is  not  easy — 
nay,  all  but  impossible — to  lead  a  life  of  intellectuality,  purity, 
and  righteousness,  amid  filth,  poverty,  and  all  the  adjuncts  of 
physical  debasement.  And,  if  this  proposition  be  correct,  then  it 
is  a  condition  precedent  to  the  future  progress  and  well-being  of 
society,  first,  that  there  shall  be  continually  increasing  abundance  ; 
and,  second,  that  this  abundance  shall  also,  to  the  greatest  extent 
consistent  with  the  retention  and  exercise  of  individual  freedom, 
be  equally  distributed  among  the  masses.  And  the  great  ques- 
tion of  the  age,  one  which  the  course  of  events  shows  that  we 
must  before  long,  either  voluntarily  or  involuntarily,  meet  and 
answer,  is,  How  can  these  ends  be  best  accomplished? 

By  the  majority  of  those  who  have  undertaken  to  discuss  these 
questions  in  the  interests  of  labor,  the  idea  is  put  forth  that  the 
ends  desired  can  be  most  fully  and  rapidly  attained  through  the 
enactment  of  law ;  but,  in  respect  to  the  extent  to  which  the  law 
is  to  be  made  operative,  the  ideas  which  are  entertained  and 
expressed  have  no  little  of  diversity. 

In  Europe,  the  masses  emerging  from  the  sluggishness  and 
torpor  in  which  for  centuries,  like  brutes,  they  have  been  content 
to  suffer  and  to  wait,  and  grasping  at  once  the  idea — long  familiar 
to  the  people  of  this  country — that  all  men  are  created  equal, 
have  speedily  passed  to  a  conviction  that,  because  thus  created 
equal,  they  have,  in  common  with  all,  an  equal  right  to  all  acquired 
property.  And  hence  we  find  such  leaders  in  the  labor-movement 
as  Proudhon  and  others  in  France  and  Germany,  assuming  and 
maintaining  the  position  "  that  property  is  t/ie/t,"  and  demanding 
that  through  legislation  the  State  shall  take  possession  of  all 
property,  and  provide  for  all  its  citizens  an  equal  and  adequate 
support. 

Now,  it  would  seem  as  if  no  argument  could  be  needed  in  this 
country  to  expose  the  wickedness  and  folly  of  such  a  proposition  ; 
and  yet  such  doctrines,  in  a  thinly  disguised  form,  are  continually 
preached  in  this  country  by  men  claiming  to  be  respectable  and 
intelligent  to  a  much  greater  extent  than  the  community  are  gen- 
erally aware ;  and  not  only  preached,  but  received  with  an  appa- 
rently  increasing   favor   and   interest.     Thus,  for  example,  in   a 


248  PRACTICAL  ECONOMICS. 

tract  issued  by  one  of  the  recognized  leaders  of  the  eight-hour 
movement  in  Massachusetts,  I  find  the  statement  that  the  ulti- 
mate end  and  meaning  of  this  special  labor  reform  is  to  be  the 
compulsory  limitation  of  labor  by  legislative  enactment  to  six 
hours  per  day ;  and  that,  out  of  such  a  law  and  co-operation,  it 
will  follow,  that  "the  commonest  or  the  most  obscure  laborer  will 
live,  if  he  chooses,  in  dwellings  as  beautiftil  and  as  convenient  as  any 
which  are  now  monopolized  by  the  wealthy."  1  To  render  his  plan, 
however,  in  any  degree  practicable,  the  author  singularly  omitted 
to  provide  by  statute  that  all  men  should  be  born  with  an  exact 
physical  and  mental  capacity  for  production,  and  that,  if  any  one 
by  increased  industry  or  frugality  should  perchance  produce  more 
than  another,  the  surplus  should  be  forcibly  taken  from  him 
without  compensation.  Under  such  circumstances  it  cannot  be 
doubted  that  all  at  no  distant  day  would  come  to  live  in  houses 
of  equal  similarity ;  but  the  style  of  architecture  which  would 
prevail  would  probably  closely  resemble  that  which  now  charac- 
terizes such  truly  free  localities  as  the  Desert  of  Sahara,  the  in- 
terior of  Caffrc-land,  or  the  domains  of  the  Esquimaux. 

Other  illustrations  to  the  same  effect  may  be  found  in  the 
circumstance  that  a  paper  is  now  issued  regularly  in  New  England, 
which  is  devoted  mainly  to  the  object  of  combating  the  receipt 
of  interest  or  hire  for  the  loan  or  use  of  capital,  or,  what  is  the 
same  thing  (whether  the  editors  be  or  be  not  conscious  of  it),  of 
combating  abundance  or  accumulation  ;  that  the  same  idea  finds 
favor  in  numerous  pamphlets  recently  issued  in  various  parts  of 
the  country,  some  of  which  exhibit  no  small  ability  ;  and  finally 
in  the  disposition  so  frequently  evinced  by  our  legislative 
bodies,  to  deal  with  corporate  property  in  accordance  with  the 
principle  of  might,  rather  than  in  accordance  with  the  principle  of 
right. 
f  It  is  therefore  well  for  us,  even  here  in  this  boasted  land  of 
freedom  and  intelligence,  occasionally  to  go  back  to  first  princi- 
ples, and  see  where  these  ideas  about  the  distribution  of  wealth 
by  direct  or  indirect  compulsion,  or  about  diminishing  the  incen- 
tives for  personal  accumulation,  are  likely  to  lead  us. 

It  is  evident,  in  the  first  place,  that  such  notions  are  wholly 
antagonistic  to  the  idea  of  personal  freedom,  unless  we  mean  to 

1  The  Meaning  of  the  Eight-Hour  Movement.     Ira  Steward,  Boston,  1868. 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  249 

restrict  the  meaning  of  freedom  simply  to  the  possession  and  con- 
trol of  one's  own  person  irrespective  of  property,  which  would  in- 
volve little  more  than  the  right  to  free  locomotion  ;  and,  second, 
that  they  tend  to  impair  the  growth  of,  if  not  wholly  to  destroy, 
civilization  itself.  For  if  liberty  is  not  afforded  to  all,  rich  and 
poor,  high  and  low,  to  keep,  and  to  use  in  whatever  way  they  may 
see  fit,  that  which  they  lawfully  acquire,  subject  only  to  the  neces- 
sary social  restraint  of  working  no  positive  ill  to  one's  neighbor, — 
then  the  desire  to  acquire  and  accumulate  property  will  be  taken 
away  ;  and  capital,  meaning  thereby  not  merely  money,  which 
constitutes  but  a  very  small  part  of  the  capital  of  any  community, 
but  all  those  things  which  are  the  accumulated  results  of  labor, 
foresight,  and  economy, — the  machinery  by  which  abundance  is 
increased,  toil  lightened,  and  comfort  gained, — will,  instead  of  in- 
creasing, rapidly  diminish. 

And,  in  order  to  comprehend  the  full  meaning  of  this  state- 
ment, allow  me  to  call  your  attention  to  an  illustration  of  the 
extreme  slowness  with  which  that  which  we  call  capital  accumu- 
lates, even  under  the  most  favorable  circumstances. 

By  the  census  of  1870,  the  aggregate  wealth  of  the  United 
States,  making  all  due  allowances  for  duplication  in  valuation,  was 
probably  not  in  excess  of  twenty-five  tlionsand  millions.  But  vast 
as  the  sum  is,  and  'difficult  as  it  certainly  is  for  the  mind  to  form 
any  adequate  conception  of  it  in  the  aggregate,  it  is,  nevertheless, 
most  interesting  to  inquire  what  it  is  that,  measured  by  human 
effort,  it  represents.  And  the  answer  is,  that  it  represents,  first, 
a  value,  supposing  the  whole  sum  to  be  apportioned  equally,  of 
about  six  hundred  and  twenty  dollars  to  each  individual, — not  a 
large  amount,  if  one  was  to  depend  on  its  interest  at  six  per  cent, 
as  a  means  of  support ;  and,  second,  it  represents  the  surplus  re- 
sult of  all  the  labor,  skill,  and  thought  exerted,  and  all  the  capital 
earned  and  saved,  or  brought  into  the  country,  for  the  last  two 
hundred  and  fifty  years,  or  ever  since  the  country  became  practi- 
cally the  abode  of  civilized  men. 

Now,  with  capital,  or  the  instrumentalities  for  creating  abun- 
dance, increasing  thus  slowly,  it  certainly  stands  to  reason  that  we 
need  be  exceedingly  careful,  lest,  by  doing  any  thing  to  impair 
its  security,  we  impair  also  its  rate  of  increase  ;  and  we  accordingly 
find,  as  we  should  naturally  expect  from  the  comparatively  high 


250  PRACTICAL  ECONOMICS. 

education  of  our  people,  that  the  idea  of  any  direct  interference 
with  the  rights  of  property  meets  with  but  little  favor  upon  this 
side  of  the  Atlantic.  But  at  the  same  time  we  cannot  deny  that 
many  of  the  most  intelligent  of  the  men  and  women  interested  in 
the  various  labor-reform  movements  in  this  country,  taking  as  the 
basis  of  their  reasoning  the  large  nominal  aggregate  of  the  na- 
tional wealth,  and  the  large  advance  which  has  recently  been 
made  in  the  power  of  production,  and  considering  them  in  the 
abstract,  irrespective  of  time  or  distribution,  have  nevertheless 
adopted  the  idea — vague  and  shadowy  though  it  may  be, — that 
the  amount  of  the  present  annual  product  of  labor  and  capital  is 
sufficient  for  all ;  and  that  all  it  is  necessary  to  do  to  insure  com- 
fort and  abundance  to  the  masses,  is  for  the  State  somehow  to 
intervene, — either  by  fixing  the  hours  of  labor,  or  the  rates  of 
compensation  for  service,  or  the  use  of  capital, — and  compel  its 
more  equitable  distribution. 

Now,  that  a  more  equitable  distribution  of  the  results  of  pro- 
duction is  desirable,  and  that  such  a  distribution  does  not  at 
present  take  place  to  the  extent  that  it  might  without  impairing 
the  exercise  of  individual  freedom,  must  be  admitted  ;  but,  be- 
fore undertaking  to  make  laws  on  the  subject,  is  it  not  of  import- 
ance to  first  find  out  how  much  we  have  really  got  to  divide  ? 

Let  us  see. 

Stated  in  money,  the  maximum  value  of  the  annual  product 
of  the  United  States  is  not  in  excess  of  $7,000,000,000  (probably 
less);  of  which  the  value  of  the  annual  product  of  all  our  agricul- 
ture,— our  cotton  and  our  corn,  our  beef  and  our  pork,  our  hay, 
our  wheat,  and  all  our  other  fruits, — is  returned  by  the  last  census 
with  undoubted  approximative  accuracy,  at  less  than  one  half  that 
sum  ;  or  in  round  numbers  at  $2,400,000,000. 

But  while  this  sum  of  estimated  yearly  income,  like  the  figures 
which  report  the  aggregate  of  our  national  wealth,  is  so  vast  as  to 
be  almost  beyond  the  power  of  mental  conception,  there  is 
yet  one  thing  about  it  which  is  certain,  and  can  be  readily  com- 
prehended ;  and  that  is,  that  of  this  whole  product,  whether  we 
measure  it  in  money  or  in  any  other  way,  fully  nine  tenths,  and 
probably  a  larger  proportion,  must  be  immediately  consumed,  in 
order  that  we  may  simply  live,  and  make  good  the  loss  and  waste 
of  capital  previously  accumulated ;  leaving   not   more  than  one 


PROD  UC TION  A ND  DIS TRIE  U TION  OF  WEAL  TH.  2  5  I 

ienth  to  be  applied  in  the  form  of  accumulation  for  effecting  a 
future  increased  production  and  development.1 

Or  to  state  the  case  differently,  and  at  the  same  time  illustrate 
how  small,  even  under  the  most  favorable  circumstances,  can  be 
the  annual  surplus  of  production  over  consumption,  it  is  only 
necessary  to  compare  the  largest  estimate  of  the  value  of  our 
annual  product,  with  our  largest  estimate  of  the  aggregate  national 
wealth,  to  see  that,  practically,  after  two  hundred  and  fifty  years 
of  toiling  and  saving,  we  have  only  managed  as  a  nation  to  get 
about  three  years  and  a  half  ahead,  in  the  way  of  subsistence  ;  and 
that  now  if,  as  a  whole  people,  we  should  stop  working  and  pro- 
ducing, and  repairing  waste  and  deterioration,  and  devote  our- 
selves exclusively  to  amusement  and  idleness,  living  on  the  ac- 
cumulation of  our  former  labors  or  the  labor  of  our  fathers,  four 
years  would  be  more  than  sufficient  to  starve  three  fourths  of  us 
out  of  existence,  and  reduce  the  other  one  fourth  to  the  condi- 
tion of  semi-barbarism  ;  a  result,  on  the  whole,  which  it  is  well  to 
think  of  in  connection  with  the  promulgation  of  certain  new  theo- 
ries, that  the  best  way  of  increasing  abundance,  and  promoting 
comfort  and  happiness,  is  by  decreasing  the  aggregate  and  oppor- 
tunities of  production. 

In  fact,  there  are  few  things  more  transitory  and  perishable 
than  that  which  we  call  wealth ;  and,  as  specifically  embodied  in 
the  ordinary  forms  we  see  about  us,  its  duration  is  not,  on  the 
average,  in  excess  of  the  life  of  a  generation. 

The  railroad  system  of  the  country  is  estimated  to  have  cost 
more  than  four  thousand  millions  of  dollars  * ;  but  if  left  to  itself, 

1  According  to  the  more  reliable  data  furnished  by  the  U.  S.  Census  of  1880,  the 
aggregate  wealth  of  the  country  has  been  estimated  at  about  forty  thousand  millions  of 
dollars  ($43,642,000,000  ;  which,  if  equally  divided  among  the  whole  population,  would 
have  amounted  to  $880  per  head  ;  or,  omitting  the  value  of  land,  the  value  of  the  actual 
wealth  of  the  United  States,  created  by  the  hand  of  man  during  the  whole  period  of  its 
history,  could  not  have  been  more,  in  1880,  than  from  $400  to  $500  for  each  person. 

The  value  of  the  annual  product  of  all  the  labor  and  capital  of  the  United  States 
for  1880,  according  to  estimates  based  on  the  census  data  of  that  year,  was  $8,500,000,- 
000.  As  the  population  of  the  country,  in  1880,  was  fifty  millions  (50,155,783),  the 
average  annual  share  of  each  person  of  this  product  would  have  therefore  been  about 
$170  ;  which  would  make  the  average  individual  expenditure  permissible  to  meet  the 
expenses  of  living,  provided  each  person  was  obliged  to  live  on  the  results  of  his  own 
labor,  about  47  cents  per  day. 

2  The  share  capital  and  funded  and  floating  debts  of  the  railroads  of  the  United 
States,  for  the  year  1883,  have  been  estimated  at  $6,765,000,000. 


252  PRACTICAL  ECONOMICS. 

without  renewals  or  repairs,  its  value  as  property  in  ten  years 
would  entirely  vanish  ;  and  so  also  with  our  ships,  our  machinery, 
our  tools  and  implements,  and  even  our  land  when  cultivated 
without  renovation.  For  it  is  to  be  remembered,  that  those  same 
forces  of  nature  which  we  have  mastered,  and  made  subservient 
for  the  work  of  production,  are  also  our  greatest  natural  enemies, 
and  if  let  to  themselves  will  tear  down  and  destroy  much  more 
rapidly  than  under  guidance  they  will  aggregate  and  build  up.  A 
single  night  was  sufficient  in  Chicago  to  utterly  destroy  what  was 
equivalent  to  one  quarter  of  the  whole  surplus  product  which  dur- 
ing the  preceding  year  the  nation  had  accumulated  ;  and  of  all 
the  material  wealth  of  the  great  and  rich  nations  of  antiquity, — 
of  Egyptian,  Assyrian,  Tyrian,  and  Roman  civilizations, — nothing 
whatever  has  come  down  to  us,  except,  singularly  enough,  those 
things  which,  like  their  tombs  and  public  monuments,  never  were 
possessed  of  a  money  valuation. 

But  the  inferences  which  we  are  warranted  in  drawing  from 
these  facts  and  figures  are  by  no  means  exhausted.  Supposing 
the  value  of  our  annual  product  to  be  equally  divided  among  our 
present  population  :  then  the  average  income  of  each  individual 
would  be  about  $170  per  annum  ;  out  of  which  food,  clothing, 
fuel,  shelter,  education,  travelling  expenses,  and  means  of  enjoy- 
ment are  to  be  provided,  all  taxes  paid,  all  waste,  loss,  and  de- 
preciation made  good,  and  any  surplus  available  as  new  capital 
added  to  former  accumulations. 

Now,  if  at  first  thought  this  deduction  of  the  average  indi- 
vidual income  of  our  people  seems  small,  it  should  be  remembered 
that  it  is  based  on  an  estimate  of  annual  national  product  greater 
both  in  the  aggregate,  and  in  proportion  to  numbers,  than  is  en- 
joyed by  any  other  nation,  our  compeers  in  wealth  and  civiliza- 
tion ;  and,  further,  that  this  $170  is  not  the  sum  which  all  actually 
receive  as  income,  but  the  average  sum  which  each  would  receive, 
were  the  whole  annual  product  divided  equally.  But  as  a  practical 
matter  we  know  that  the  annual  product  is  not  divided  equally; 
and,  furthermore,  that,  as  long  as  men  are  born  with  different 
natural  capacities,  it  never  will  be  so  divided.  Some  will  receive, 
and  do  receive,  as  their  share  of  the  annual  product,  the  annual 
average  we  have  stated,  multiplied  by  hundreds  or  even  thou* 
sands ;  which  of  course  necessitates  that  very  many  others  shall 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  253 

receive  proportionately  less.  And  how  much  less  is  indicated  by 
recent  investigations  which  show,  that  for  the  whole  country  the 
average  earnings  of  laborers  and  unskilled  workmen  is  not  in  ex- 
cess of  four  hundred  dollars  per  annum, — the  maximum  amount 
being  received  in  New  England,  and  the  minimum  in  the  Southern, 
or  former  slaveholding  States  ;  which  sum,  assuming  that  the 
families  of  all  these  men  consist  of  four,  two  adults  and  two 
children,  would  give  one  hundred  dollars  as  the  average  amount 
which  each  individual  of  the  class  referred  to  produces,  and  also 
the  amount  to  which  each  such  individual  must  be  restricted  in 
consumption  ;  for  it  is  clear,  that  no  man  can  consume  more  than 
he  or  his  capital  produces,  unless  he  can  in  some  way  obtain  the 
product  of  some  other  man's  labor  without  giving  him  an  equiva- 
lent for  it. 

We  are  thus  led  to  the  conclusion  that,  notwithstanding  the 
wonderful  extent  to  which  we  have  been  enabled  to  use  and  con- 
trol the  forces  of  nature  for  the  purpose  of  increasing  the  power 
of  production,  the  time  has  not  yet  come,  when  society  in  the 
United  States  can  command  such  a  degree  of  absolute  abundance 
as  to  justify  and  warrant  any  class  or  individual,  rich  or  poor,  and 
least  of  all  those  who  depend  upon  the  product  of  each  day's 
labor  to  meet  each  day's  needs,  in  doing  any  thing  which  can  in 
any  way  tend  to  diminish  abundance  ;  and  furthermore,  that  the 
agency  of  law,  even  if  evoked  to  the  fullest  extent  in  compelling 
distribution,  must  be  exceedingly  limited  in  its  operations. 

Let  the  working-man  of  the  United  States,  therefore,  in  every 
vocation,  demand  and  strive,  if  he  will,  for  the  largest  possible 
share  of  the  joint  products  of  labor  and  capital ;  for  it  is  the 
natural  right  of  every  one  to  seek  to  obtain  the  largest  price  for 
"tnat  which  he  has  to  sell.  But  if  in  so  doing  he  restricts  procluc^" 
tion,  and  so  diminishes  abundance,  he  does  it  at  his  peril ;  for,  by 
a  law  far  above  any  legislative  control  or  influence,  whatever  in- 
creases scarcity  not  only  increases  the  necessity,  but  diminishes 
the  rewards  of  labor. 

Street  processions,  marching  after  flags  and  patriotic  mottoes, 
even  if  held  every  day  in  the  week,  will  never  change  the  condi- 
tions which  govern  production  and  compensation.  Idleness 
produces  nothing  but  weeds  and  rust  ;  and  such  products  are 
not  marketable  anywhere,  though  society  often  pays  for  them 
most  dearly. 


254  PRACTICAL   ECONOMICS. 

But  if  law,  acting  in  the  manner  proposed  by  the  representa- 
tives of  the  working-men,  is  not  likely  to  avail  any  thing,  and  if 
abundance  is  not  as  great  as  it  might  be,  and  distribution  not  as 
equitable  as  it  ought  to  be,  wherein  is  the  remedy  ?  Shall  we  let 
things  drift  along  as  in  times  past,  trusting  that  Providence 
will  finally  do  for  us  what  we  are  unwilling  or  unable  to  do 
for   ourselves  ? 

My  answer  to  this  is,  that  the  first  step  towards  effecting  a  so- 
lution of  the  problem  under  consideration  is  to  endeavor  to  clearly 
comprehend  the  conditions  involved  in  it  ;  and  that,  when  we 
have  entered  upon  an  investigation  for  that  purpose,  we  shall 
soon  see  that  the  causes  which  tend  to  diminish  abundance,  and 
restrict  the  rewards  of  labor,  in  the  Old  World,  are  not  the 
same  as  exist  in  the  New ;  and  that  therefore  the  agencies 
adopted  for  relief  in  the  one  case  are  not  likely  to  prove  remedial 
in  the  other. 

/In  the  Old  World,  the  prime  cause  of  the  lack  of  abundance, 
and  its  resulting  pauperism,  is  an  over-crowded  and  increasing 
population,  and  the  enormous  waste  and  expenditures  contingent 
on  great  standing  armies  and  a  continued  war  policy. 

All  the  natural  resources,  originally  the  free  gift  of  Nature, 
have  long  ago  been  fully  appropriated,  and  in  part  exhausted. 
Every  foot  of  arable  land  has  its  owner  or  tenant  ;  every  mine, 
quarry,  forest,  or  tree-bearing  fruit,  its  possessor ;  and  even  the 
right  to  fish  in  the  waters,  or  capture  the  wild  beasts  of  the  field, 
or  the  fowls  of  the  air,  has  become  in  a  great  degree  an  exclusive 
privilege. 

When  there  is  but  one  to  buy,  and  two  to  sell,  the  buyer  fixes 
the  price.  When  there  are  two  to  buy,  and  only  one  to  sell,  the 
seller  has  the  advantage. 

Now,  Europe,  in  respect  to  labor,  has  been  for  centuries  the 
seller,  rather  than  the  buyer,  of  labor ;  and  the  buyer,  therefore, 
has  always  been,  and  is  now,  all-powerful  in  fixing  its  price,  and 
controlling  it  to  his  advantage.  Again,  in  a  country  whose 
natural  capital  or  resources — L  e.,  fertile  and  cheap  land,  abun- 
dant timber,  food,  minerals,  etc. — are  unexhausted  or  unappropri- 
ated, as  in  the  United  States,  the  rewards  of  labor,  or  wages,  will 
be  necessarily  high  ;  and  on  the  other  hand,  where  the  reverse 
condition  of  things  prevails,  as  in  Europe,  the  rewards  of  labor,  as 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  255 

expressed  in  wages,  must  be  comparatively  less.  In  other  words, 
as  has  been  pointed  out  by  Prof.  Cairnes :  "  So  far  as  high  wages 
and  profits  are  indications  of  cost  of  production  at  all,  high  wages 
and  profits  are  indications  of  a  low  cost  of  production,  since  they 
are  indications — being,  in  fact,  the  direct  results — of  high  indus- 
trial productiveness."  Nothing,  therefore,  more  strikingly  illus- 
trates the  difference  in  the  conditions  of  the  labor-problem  in 
Europe  and  the  United  States,  than  the  difference  in  the  average 
rate  of  the  wages  of  labor  in  the  two  countries  ;  and  also  the  fal- 
lacy of  the  popular  notion,  that  legislative  interference  is  neces- 
sary in  the  United  States  to  protect  domestic  industry  against 
the  pauper-labor  of  Europe  ;  or,  in  other  words,  to  protect  the 
people  of  the  United  States  against  the  evils  of  abundance. 

Under  such  a  state  of  things,  therefore,  the  efficient  remedy, 
and  indeed  the  only  remedy,  against  pauperism  in  an  overcrowded 
country,  must  be  emigration  ;  and  it  is  one  of  the  most  curious 
of  social  phenomena,  that,  while  the  results  of  the  most  recent  in- 
vestigations show  that  thousands  in  the  great  cities  of  Europe 
are  annually  crowded  out  of  existence  by  the  mere  fact  of  their 
numbers,  there  are  yet  almost  continental  areas  of  the  earth's  sur- 
face, healthy,  easy  of  access,  and  comparatively  uninhabited, 
where  the  amount  of  labor  necessary  to  secure  all  the  essentials 
of  a  simple  livelihood  is  but  little  in  excess  of  the  instinctive  re- 
quirements of  the  system  for  physical  exercise  ;  as,  for  example, 
in  the  delicious  islands  of  Polynesia,  where  a  temperature  obviat- 
ing any  requirement  for  artificial  heat  prevails  uninterruptedly, 
and  where  the  plantain,  the  cocoa-palm,  and  the  bread-fruit  spring 
up  and  flourish  spontaneously ;  and  also  in  the  West  Indies, 
where  the  late  Charles  Kingsley,  in  his  book  "  A  Christmas  in  the 
West  Indies  "  (1871), .says,  that  one  of  the  first  things  which  a 
visitor  learns  in  landing  at  "  Port  of  Spain,"  in  the  Island  of 
Trinidad,  is,  that  there  are  eight  thousand  persons,  or  about  one 
third  of  the  population  of  the  city,  who  have  no  visible  means  of 
support,  or  who  live  without  regular  employment,  and  yet  are 
evidently  strong,  healthy,  and  well  fed.  The  same  author  also 
describes  the  life  of  an  English  emigrant  in  this  island,  whom  he 
visited,  as  follows : 

"  The  sea  gives  him  fish  enough  for  his  family.  His  cocoa- 
palms  yield  him  a  little  revenue.     He  has  poultry,  kids'  and  goats' 


256  PRACTICAL  ECONOMICS. 

milk  more  than  he  needs.  His  patch  of  provision-ground  gives 
him  corn  and  roots,  sweet  potatoes,  and  fruits  all  the  year  round. 
He  needs  nothing,  fears  nothing,  owes  nothing." 

But,  per  contra,  Mr.  Kingsley  adds : 

"  News  and  politics  are  to  him  like  the  distant  murmur  of  the 
surf  at  the  back  of  the  island, — a  noise  which  is  nought  to  him. 
His  Bible,  his  almanac,  and  three  or  four  old  books  on  a  shelf,  are 
his  whole  library.  He  has  all  that  man  needs,  more  than  man 
deserves,  and  is  far  too  wise  to  wish  to  better  himself ";  which  last 
expression  is  equivalent  to  saying,  that,  the  animal  wants  being 
abundantly  satisfied,  he  wishes  to  remain  an  animal.  And  this 
conclusion,  furthermore,  may  be  regarded  as  the  result  of  necessity 
rather  than  of  choice ;  for,  if  man  resident  in  the  tropics  is  desirous 
of  any  thing  much  beyond  what  Nature  furnishes  almost  as  a  free 
gift,  the  realization  of  the  desire  can  only  be  attained  through 
labor  under  conditions  of  climate  so  exhausting  that  the  white 
race  shrinks  from  its  execution,  and  for  the  most  part  is  incapable 
of  its  endurance ;  as  is  seen,  for  example,  in  the  raising  of  cotton, 
coffee,  sugar,  and  other  similar  tropical  productions.  And  it 
would  indeed  seem  as  if  Nature,  in  view  of  the  fact  that  great 
physical  exertion  and  an  elevated  temperature  are  incompatible, 
had  made  provision  for  man's  residence  in  the  tropics  by  furnish- 
ing him,  with  the  minimum  of  exertion,  those  vegetable  products 
which  are  especially  adapted  to  maintain  and  support  a  physical 
existence.  And  whether  we  admit  the  example  of  design  or  not, 
it  is  certainly  curious  to  note  how  man,  when  transferred  from 
temperate  zones  to  tropics,  instinctively  adapts  himself  to  these 
conditions,  and  exchanges  a  life  of  activity  for  one  of  indolence. 
Of  this,  the  description  of  the  European  emigrant  in  the  West 
Indies,  which  I  have  quoted  from  Mr.  Kingsley,  is  one  illustration. 
Another  is  to  be  found  in  the  fact,  often  noted  and  commented 
on,  of  the  rapidity  with  which  young  men  of  New  England,  sent 
out  as  clerks  or  factors  to  Singapore,  Manilla,  or  Calcutta,  ex- 
change their  original  physical  and  intellectual  activity  for  the 
listless  indolence  of  the  native  population.  And,  descending  to 
the  animal  kingdom,  it  is  said  that  the  northern  honey-bee,  trans- 
ported to  the  tropics,  ceases  after  the  first  season  to  make  provi- 
sion for  the  winter,  and,  laying  aside  its  habits  of  industry  with 
the  necessity  for  exertion,  becomes  not  only  a  drone,  but  a  veritable 
pest  to  the  community. 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  257 

In  the  United  States,  on  the  other  hand,  the  case  is  entirely 
different.  We  have,  in  the  first  place,  no  excess  of  population  in 
proportion  to  the  area  of  country  inhabited  ;  but,  on  the  contrary, 
we  have,  as  a  source  of  abundance  and  a  certain  barrier  against 
want,  that  which  no  nation  of  Europe  possesses;  namely,  an 
almost  unlimited  supply  of  cheap,  fertile  land.  We  have  such  a 
variety  of  soil,  of  climate,  and  of  crop,  that  a  deficiency  of  food, 
which  in  very  many  civilized  countries  is  ever  a  source  of  anxiety, 
is  with  us  a  matter  of  impossibility  ;  for  the  very  conditions  which 
tend  to  reduce  the  aggregate  of  the  crops  in  one  section  tend  to 
increase  their  fruition  in  some  other.  We  have,  as  it  were,  the 
monopoly  of  the  staple  textile  fibre  of  the  world's  clothing.  We 
have  more  of  coal,  the  symbol  and  the  source  of  mechanical 
power,  than  exists  in  all  other  countries.  We  have  every  facility, 
natural  and  artificial,  for  the  transportation  and  exchange  of 
products.  We  have  a  form  of  government  in  which  the  will  of 
the  people  constitutes  the  law.  We  have,  in  short,  all  the  condi- 
tions which  givQ  to  labor  its  greatest  productiveness,  and  to 
capital  its  greatest  reward.  And  if  to-day  these  conditions  are 
not  fulfilled ;  if  there  is  not  to-day  unison  between  labor  and 
capital ;  if  there  is  not  a  sufficient  degree  of  material  abundance, 
and  a  sufficient  equity  in  its  distribution,  to  lift  up  life  among  the 
masses,  and  make  it  jomewhat  jnore  than  a  struggle  tor  existence, 
—then  we  shall  be  forced  to  one  of  two  conclusions:  either  the 
olDstacTes"whlch  militate  and  prevent  these  results  are  all  artificial ; 
or  that  it  is  in  accordance  with  the  designs  of  Providence  that 
tliere~sriair always  be  a  needy  and  dependent  class,  that  there  is  a 
natural  antagonism  between  labor  and  capital,  and  that  the  capac- 
ity of  the  earth  for  production  is  not  adequate  to  meet  the  natural 
increase  of  the  population  that  Providence  has  placed  upon  it. 

Now,  I,  for  one,  fully  accept  the  first  of  these  conclusions,  and 
wholly  reject  the  latter.  And  although  there  is  much  about  us 
which  would  seem  to  indicate  that  the  characteristic  evils  which 
affect  society  in  the  Old  World  are  being  transferred  to  the  New; 
though  the  present  tendency  seems  to  be  toward  a  concentration 
of\veaitrr  in  a  few  hands,  to  make  the  rich  richer  and  the  poor 
poorer, — I  nevertheless  feel  certain  that  the  causes  which  have 
led  to  these  results,  and  which  for  the  present  stand  in  the  way  of 
.  a  greater  abundance  and  a  larger  life,  are  wholly  within  our  con- 


258  PRACTICAL   ECONOMICS. 

trol,  and  essentially  different  from  the  causes  which  in  Europe  are 
recognized  as  working  disadvantageously  to  the  interests  of  the 


masses.  To  specifically  enumerate  them,  and  to  point  out  the 
degree  in  which  each  is  operative,  may  not  as  yet,  through  lack 
of  reliable  data,  be  practicable ;  but,  generalizing  broadly,  three 
causes  may  be  mentioned  as  especially  militating  against  the  aug-^ 
mentation  of  abundance  in  the  United  States  : 

Fir  St,  Failure  to  secure  the  proper  and  possible  maximum  of 
production  in  industrial  enterprises  which  have  long  since  passed 
beyond  the  domain  of  experiment. 

Second,   Inexcusable  and  inordinate  waste  in  using. 

Third,  Inequalities  in  distribution,  due  to  obstruction  created 
by  legislation. 

I  have  thus  reviewed,  as  briefly  as  the  subject  will  admit,  some 
of  the  principal  obstacles  which  at  present,  in  this  country,  seem 
to  me  to  stand  in  the  way  of  a  greater  material  abundance,  a  more 
equitable  distribution,  and  a  larger  life.  Did  time  and  opportu- 
nity suffice,  an  almost  infinite  amount  of  curious  and  interesting 
illustrations,  drawn  from  our  recent  national  experiences,  might  be 
given  ;  but,  apart  from  any  further  detail,  the  general  results  of 
owr  economic  progress  since  i860  may  be  summed  in  brief  as 
iollows  :  We  have  increased  the  power  of  production  with  a 
given  amount  of  personal  effort  throughout  the  country,  probably 
at  least  twenty-five,  and  possibly  forty  per  cent.  We  have  not  de- 
creased the  cost  of  living  within  the  same  period,  to  the  masses,  to 
any  thing  like  the  same  extent.1  But  startling  as  is  this 
""  statement,  the  truth  of  which  any  man  can  verify  if  he  will,  the 
attainment  of  a  better  result  is  entirely  within  the  power  of  society 
in  this  country  to  effect,  if  it  will  only  avail  itself  of  remedies 
whose  simplicity  and  effectiveness  long  experience  has  proved 
beyond  all  controversy. 

But  herein  consists  the  difficulty.  Like  Naaman  the  Syrian, 
we  are  anxious  to  be  cleansed  ;  but,  like  Naaman,  we  expect  to 
be  called  upon  to  do  some  great  thing,  and  experience  a  measure 
of  disappointment  when  told  that  the  simplest  measures  are  likely 
to  prove  the  most  effectual. 

1  An  analysis  of  the  business  of  manufacturing  pig-iron  indicates  an  increased  pro- 
duct in  1879  as  conpared  with  i860 — capital  remaining  the  same — of  forty-six  per 
cent.  ;  diminution  in  the  number  of  hands  employed  6^  per  cent.  ;  increase  of 
wages  per  hand,  37TVtf  per  cent. 


PRODUCTION  AND  DISTRIBUTION  OF  WEALTH.  259 

In  point  of  natural  resources,  Providence  has  given  us  all  that 
we  desire.  And  that  these  resources  may  be  made  productive  of 
abundance,  great  and  overflowing,  to  all  sorts  and  conditions 
of  men,  there  must  be,  first,  industry  and  economy  on  the 
part  of  the  individual ;  and,  second,  on  the  part  of  society,  a 
guaranty  that  every  man  shall  have  an  opportunity  to  exert  his 
industry,  and  exchange  its  products,  with  the  utmost  freedom  and 
the  greatest  intelligence  ;  and,  when  society  has  done  this,  we  will 
have  solved  the  problem  involved  in  the  relations  of  capital  and 
labor,  so  far  as  the  solution  is  within  the  cpntrol  of  human  agency  ; 
for  in  giving  to  each  man  opportunity,  conjoined  with  feedom  and 
intelligence,  we  invest  him,  as  it  were,  "  with  crown  and  mitre, 
and  make  him  sovereign  over  himself." 


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